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Inflation

German annual inflation drops to three-year low on cheaper fuel costs

The cost of living in Germany in 2013 rose less than in previous years as cheaper global oil reduced Germans car fuel and heating bills. But unlike in other eurozone nations, fears of deflation appear unfounded.

The annual inflation rate in Germany last year came in at 1.5 percent, the country's statistics office, Destatis, announced Thursday, as it released .

The rise in the cost of living was less significant than in 2012 and 2011, in which prices rose 2 percent and 2.1 percent respectively, Destatis said in a statement.

The lower rate was primarily the result of falling prices for car fuels, which had dropped 3.4 percent in 2013, as well as by reduced costs for heating oil, down 6 percent, it added.

Other goods and services which had become cheaper over the year were coffee and tea, down 3.3 percent, consumer electronics which cost 5.9 percent less, as well as telecommunications costs, falling by 1.6 percent.

On the upside concerning prices were primarily groceries fruit and vegetable, up 7.2 and 6.1 percent respectively. The most significant rises were recorded for potatoes, increasing 28.7 percent, and apples which were almost a quarter more expensive than in 2012.

The fall in German inflation falls in line with dropping rates in most European countries, although it is less significant. Italy and Spain recorded inflation rates of just 0.6 percent and 0.3 percent respectively for December, while prices in Greece even fell at a rate of 2.9 percent year-on-year at the last count.

In October, eurozone inflation fell to just 0.7 percent causing concerns about a downward spiral of falling prices, lower investment and subsequently less economic growth with higher unemployment. To counter fears of what is called deflation, the European Central Bank (ECB) cut its main interest rate to a historic low of 0.25 percent in an effort to boost lending in the eurozone.

According to economists, deflationary pressures in Germany were low, however, amid robust employment and steady albeit weak growth. As the German recovery was expected to strongly accelerate in 2014, they forecast inflation to inch up to at least 1.7 percent. This would come close to the ECB inflation target of around 2 percent at which the central banks perceives prices to be stable.

uhe/hc (AFP, Reuters, dpa)

DW.DE