Financial News: German Inflation Slows; Unemployment Falls

German Inflation Slows; Unemployment Falls

(RTTNews) - Germany's inflation slowed in May but core price pressures accelerated on higher service costs, and unemployment declined unexpectedly in April after a notable increase, official data showed Friday.

Reflecting the slowdown in energy price growth, consumer price inflation weakened to 2.6 percent in May, preliminary estimate from Destatis revealed. Inflation rate was forecast to stay steady at 2.9 percent, which was the highest rate since December 2023.

Likewise, EU harmonized inflation slowed to 2.7 percent from 2.9 percent a month ago. The harmonized inflation was also expected to remain unchanged at 2.9 percent.

However, core inflation that excludes prices of food and energy accelerated to 2.5 percent from 2.3 percent in the previous month.

Services inflation climbed to 3.1 percent from 2.8 percent, while goods prices grew at a slower pace of 2.2 percent compared to 2.9 percent a month ago.

Energy prices logged an annual growth of 6.6 percent compared to the 10.1 percent rise in April. Food price inflation eased to 0.4 percent from 1.2 percent.

The decline in headline inflation was due to the government's so-called tax rebate, ING economist Carsten Brzeski said.

"...today's inflation numbers should not be read as a sign that the inflation wave is already over before it actually started but rather as a confirmation that this is a relatively mild inflation wave," Brzeski said.

The economist expects inflation to crawl up in the coming months, probably reaching 4 percent by late summer.

Elsewhere, the Federal Employment Agency reported that the German jobless rate dropped to 6.3 percent in May from 6.4 percent in April. The rate was seen unchanged at 6.3 percent.

The number of unemployed declined unexpectedly by 12,000 in May, partly reversing a 19,000 increase in April. Economists had forecast a rise of 11,000.

The decline was mainly due to the counter effect following the weak April figures, the agency said.

Despite a decline in unemployment, the spring upturn has not really gained momentum this year, Federal Employment Agency Chairwoman Andrea Nahles said.

The labor force survey data from Destatis showed that the unemployment rate remained stable at an adjusted 3.8 percent in April. The number of unemployed decreased 13,000 from the previous month to 1.67 million.

On an unadjusted basis, the jobless rate rose to 3.9 percent in April from 3.8 percent in the previous year.

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