German CPI gains speed up in January, economists calm

Consumer prices increases in Germany increased at the start of 2017 amid a rising cost of energy, but by less than economists had expected.

The cost of living in the euro area's largest economy rose at a 1.9% year-on-year clip in January, its highest level since July 2013, in comparison to a 1.7% pace in the month before.

Economists had projected a rate of 2.0%.

Energy price increases sped up from 2.5% to 5.8%, while the cost of food saw the rate of gains jump to 3.2%.

In parallel, services inflation slowed from 1.5% to 1.2% while inflation in rents rose from 1.5% to 1.6%.

"But German wage growth has been subdued so far and given that the unemployment rate has recently stabilised, we doubt that wage growth or core inflation are set to surge. Meanwhile, price pressures elsewhere in the euro-zone will remain
considerably weaker given the persistent spare capacity in most economies.

"In all, recent developments do not amount to the medium-term, durable, self-sustaining, region-wide pick-up in inflation that ECB President Draghi has set as a precondition for tapering asset purchases," said Jannifer McKeown, chief european economist at Capital Economics.