World Economy

Germans Perceive Deflation for 1st Time Since 2009

Germans Perceive Deflation for 1st Time Since 2009Germans Perceive Deflation for 1st Time Since 2009

German consumers feel they are experiencing deflation for the first time since the height of the global financial crisis in 2009, a survey showed, despite a slight rise in the cost of living in December.

This perception could help boost private consumption in the months ahead, economists said, according to a Reuters report.

The actual eurozone inflation rate has already turned negative, but in Germany annual consumer prices harmonized to compare with other European Union countries rose 0.1 percent in December – still a more than a five-year low.

Germans thought that prices in Europe’s largest economy had dropped 1.2 percent in December however, after stagnating in November, the survey by UniCredit showed.

Andreas Rees, economist at UniCredit, said a fall in fuel prices was behind the perceived drop in consumer prices, while lower food costs also helped. He said this perception should help the economy, which expanded by 1.5 percent in 2014.

“Some of the money saved will certainly be put in piggy banks, but people will spend more too and that, along with record employment and rising wages, creates very good conditions for consumption to remain the main growth driver this year,” he said. Fuels like petrol and diesel cost 12.1 percent less on average in December 2014 than in the same month in 2013 due to the fall in oil prices on international markets. A barrel of oil now only costs around half as much as it did last summer.