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German inflation highest in 3 years on fuel prices

Posted January 3

— Preliminary figures show inflation in Germany rose sharply to an annual rate of 1.7 percent in December, the highest in three years, as prices for heating and auto fuel increased.

The state statistics agency Destatis said Tuesday that the inflation rate jumped from 0.8 percent the month before. The increase will help boost inflation across the 19 countries that use the euro, figures for which are due Wednesday.

The European Central Bank has cut interest rates and is injecting 80 billion euros a month into the financial system to push up eurozone inflation from weak levels — at 0.6 percent in November — toward its goal of just under 2 percent, which is considered best for the economy.

The ECB remains focused on core inflation, which excludes volatile energy prices. "With underlying price pressures still very subdued throughout the eurozone, the ECB need not rethink its high level of policy support," Jennifer McKeown, chief European economist at Capital Economics, wrote in a research note.

McKeown said that the eurozone inflation figure could rise to as high as 1.2 percent when it is released Wednesday.

She said that the upward trend could be temporary, but noted that rising prices would weigh on household incomes in the meantime.

The ECB has said it will keep buying bonds until the end of 2017, a measure which could keep the euro lower against the dollar.

Earlier, separate figures showed Germany's unadjusted unemployment rate ticked up to 5.8 percent in December from 5.7 percent the month before, mainly due to seasonal factors.

The Federal Labor Agency said that 2.568 million people were registered as unemployed. That's 36,000 more than in November — but 113,000 fewer than in December 2015, when the jobless rate was 6.1 percent.

The unemployment rate in Europe's biggest economy regularly rises during the winter months when jobs in some sectors, like construction, are less available.

In seasonally adjusted terms, the jobless rate was steady at 6 percent for the third consecutive month.

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