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German Consumer Prices Fell in August, in Line With Forecasts -- Update

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09/11/2020 | 02:53am EDT

--German consumer prices in August fell 0.1% on month as measured by national standards, and declined 0.2% on EU-harmonized standards

--The consumer price decrease was again driven by the VAT reduction

--Consumer prices remained flat on year in national standards and declined 0.1% on year in EU-harmonized standards

 

By Maria Martinez

 

German consumer prices fell in August for the second consecutive month, confirming preliminary data, German statistics agency Destatis said Friday.

Consumer prices fell 0.1% on month in August as measured by national standards, and declined 0.2% on EU-harmonized standards, the agency said. Both readings were in line with the forecasts from economists polled by The Wall Street Journal.

Consumer prices remained flat on year in national standards and declined 0.1% on the year in EU-harmonized standards, also in line with forecasts.

The low inflation rate can be partially attributed to the temporary value-added tax reduction, which was implemented on July 1 as part of the German government's stimulus package, Destatis said.

The prices of goods decreased 1.3% in August year-on-year, mainly as a result of the price decline for energy products of 6.3%. However, the price decrease in energy products was slightly smaller than in July, when it was 6.7%.

The marked year-on-year decrease in energy product prices had a downward effect on the inflation rate, the statistics office said. Excluding energy prices, the inflation rate would have been 0.7% in August, Destatis said.

Food prices were up 0.7% compared with a year earlier, with the price increase slowing markedly from the 1.2% increase in July, Destatis said. There were above-average price increases for fruit and for meat and meat products, while the prices of vegetables were down.

Services prices rose 1.0% on year in August, driven by the increase in net rents due to heating expenses, which have been unaffected by the VAT cut.

Despite the reduction in VAT, higher prices had to be paid for hairdresser services and other personal-care services, as well as for visits to restaurants and cafes, Destatis said. One reason for the price increase of these services is probably the cost of hygienic measures, the statistics agency added.

In contrast, prices of long-distance transport tickets fell 16.0%. This was largely due to the reduction in VAT on long-distance rail tickets from 19% to 7% that took effect at the beginning of the year, while the current cut of the reduced tax rate from 7% to 5% only had a partial effect, Destatis said.

 

Write to Maria Martinez at maria.martinez@wsj.com

 

Stocks mentioned in the article
ChangeLast1st jan.
GF (GF) - CMG (ELECTRONIC)/C1 -1.49% 140.325 End-of-day quote.-1.98%
LIVE CATTLE (LE) - CMG (ELECTRONIC)/C1 -0.19% 107.825 End-of-day quote.-13.37%
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