German consumer prices slow more than expected in May

The cost of living fell back by more than expected in May in the euro area's largest economy, with prices for energy and services retreating by the most.

German consumer prices decreased by 0.2% in comparison to last month and were 1.5% higher in comparison to a year ago, according to the country's Ministry of Economics.

Economists had penciled in a dip of 0.1% on the month and an annual rate of gains of 1.6%.

Energy prices rose at a 2.0% year-on-year pace, down from 5.1% in April, while food prices increased by 2.4%, as opposed to a gain of 1.8% in the month before.

Services prices on the other hand decelerated sharply, slowing from a 1.7% pace year-on-year to 1.2%.

The drop was even larger on a harmonised basis, with CPI inflation down by 0.2% versus April (consensus: 0.1%) and at 1.4% on a year ago (consensus: 1.6%).

In April, CPI had advanced at a 2.0% clip on both a non-harmonised and harmonised basis.

Weaker-than-expected prices for package holidays were the main culprit, according to Fabio Fois at Barclays Research.