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German inflation drops to lowest level in four years

German inflation drops to 0.8 per cent year-on-year, its lowest level since February 2010.

FRANKFURT: Inflation in Germany, Europe's biggest economy, fell in July to its lowest level in over four years, official data showed on Wednesday (Aug 13). Confirming a flash estimate released at the end of last month, the federal statistics office Destatis calculated that German inflation this month dropped to 0.8 per cent year-on-year, its lowest level since February 2010, after rebounding to 1.0 per cent in June.

Inflation has been unusually low across the 18-nation eurozone, fuelling concern the region could slip into deflation: a sustained and widespread drop in prices that hampers economic activity and threatens job losses. While falling prices may sound good for consumers, deflation can trigger a vicious spiral where businesses and households delay purchases, throttling demand and causing companies to lay off workers.

Such concerns persuaded the European Central Bank to cut interest rates in June and unveil other measures to ease monetary conditions in the single currency area.

Using the Harmonised Index of Consumer Prices (HICP) - the yardstick used by the ECB - inflation in Germany stood at 0.8 per cent in July, far below the bank's annual inflation target of just below 2.0 per cent.