The Federal Statistics Office announced that consumer prices increased 1.7% from the same period last year, surpassing previous estimates of 1.3%. The data of December indicates the biggest jump since since July 2013. The surprisingly surge was due to the jump in oil that was set to cover up continued weakness in underlying price pressures in the previous month, and indicates that loosing monetary policy is working.
However, the jump in consumer prices means that consumers have less income for shopping, which will further hinder the consumer’s appetite for shopping.
The data is also a sign for European Central Bank to slow down the pace of expansive monetary policy. The ECB has started the bond-buying program, which poured money into the euro zone to boost inflation. The strong results of inflation gave conservatives more scope to argue for slowing down the bond-buying program.
“This jump in inflation is a signal to exit from the ECB's expansive monetary policy,” said Clemens Fuest, the Ifo chief. “If these figures are confirmed for the euro zone as a whole (on Wednesday), the ECB should end the bond buy program in March 2017.”
The Federal Labour Office also said on Tuesday that, contrary to the inflation, the unemployment decreased more than expected in the last month of December. “The strong increase in employment that has been going on for a long time slowed since the summer months, but demand for new workers remains at a high level,” said Frank-Juergen Weise, the head of the Federal Labour Office.