Consumer prices in Germany continued to decline in December

Consumer prices in Germany continued to decline year on year in December, for the fifth month in a row and at a steady pace. The main reason was a reduction in value added tax (VAT). The Federal Statistical Office Destatis informed about it on Tuesday. According to updated data from Destatis, consumer prices in the largest European economy fell by 0.3% year on year in December 2020, the same as in the previous month. This result is consistent with preliminary data. However, it was also the largest decline in prices of goods and services since January 2015. At the same time, the fifth month of deflation last year due to a temporary reduction in VAT from 1 July 2020 to the end of last year as part of the stimulus package. Their goal was to help the economy recover from the shock caused by the new coronavirus pandemic. Statistics show that commodity prices in Germany fell by 1.8% year on year in December, mainly due to a 6% fall in energy prices. At the same time, the growth rate of food prices slowed to 0.5% from 1.4% in November. Growth in service prices remained stable at 1.1%. For the whole of 2020, the average inflation rate in Germany reached 0.5%, down from 1.4% in 2019. In a month-on-month comparison, German consumer prices rose by an estimated 0.5% in December.