'Too early for all-clear': German inflation eases slightly in November

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By Miranda Murray


BERLIN (Reuters) -German inflation cooled off slightly in November, though it remained near a record high, suggesting cost pressures have eased in Europe's largest economy but are unlikely to weaken the European Central Bank's resolve to tame prices.

German consumer prices, harmonised to compare with other European Union countries, rose by 11.3% on the year in November, preliminary data from the Federal Statistics Office showed on Tuesday, in line with forecasts by analysts polled by Reuters.

October saw the highest reading since comparable data going back to 1996, with harmonized inflation up 11.6% on the year.

Compared with October, prices were unchanged, the office added. Analysts had forecast a 0.1% month-on-month rise.

The annual increase was due to higher costs for food and energy, which have grown considerably since the war in Ukraine began and have had a substantial impact, the office said.

Energy prices eased slightly in November but were still up 38.4% compared with the same period last year, while food prices had increased by 21%, according to the office.

"It is too early to sound the all-clear because many utilities have announced significantly higher electricity and gas prices for January," said Commerzbank chief economist Joerg Kraemer, who added that November inflation eased only because prices for fuel and heating oil had calmed down somewhat.

"Underlying inflation excluding energy and food is likely to remain stubbornly high in 2023," said Kraemer.

A one-off payment for household energy bills in December and a planned price cap on gas and electricity has helped stabilize consumer sentiment, but the Bundesbank has warned that these relief measures may not be enough to bring inflation down from the double digits.

Lower inflation in Germany and Spain are likely be reflected in November euro zone inflation data to be published on Wednesday, with economists polled by Reuters expecting it to edge down to 10.4% in a flash reading after a record 10.6% on an annualised basis last month.

Such a small step down is unlikely to change ECB President Christine Lagarde's assessment that euro zone inflation has not yet peaked, which likely dampened speculation that the ECB was about to take a gentler path with future rate increases.

(Reporting by Miranda Murray, Rene Wagner and Balazs Koranyi, editing by Rachel More, Paul Carrel and Susan Fenton)

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