Cheaper energy, VAT cut push German inflation further into negative territory

FILE PHOTO: Sausages are displayed in a supermarket, amid the coronavirus disease (COVID-19) outbreak in Berlin, Germany, June 25, 2020. REUTERS/Fabrizio Bensch/File Photo

BERLIN (Reuters) - German annual consumer prices fell further in September due to lower energy costs and a VAT cut as part of the government’s stimulus push to help Europe’s largest economy recover from the coronavirus shock, data showed on Tuesday.

German consumer prices, harmonised to make them comparable with inflation data from other European Union countries, fell 0.4% year-on-year after shrinking by 0.1% in the previous month, the Federal Statistics Office said.

This compared with a Reuters forecast for a 0.1% decline and was the lowest reading since January 2015.

“The inflation rate is influenced, among other things, by the VAT cut that came into effect on July 1, 2020,” the office said in a statement.

On the month, harmonised prices also fell by 0.4%. A Reuters poll had predicted a 0.1% drop.

The European Central Bank has a target of keeping inflation close to but below 2% in the euro zone.

Reporting by Michael Nienaber; editing by Thomas Seythal