VAT Cut Pushes German Inflation Into Negative Territory

Annual consumer prices in Germany fell for the first time in more than four years in August due to a VAT cut as part of a government stimulus package to help Europe’s largest economy recover from the shock of the coronavirus pandemic, data revealed.

The Federal Statistics Office said that German consumer prices, coordinated to facilitate comparison with inflation data in other European Union countries, fell 0.1% year-on-year after flating in the previous month.

That reading came in comparison to a Reuters forecast of 0%, the first time that the reading for negative territory has decreased since May 2016.

Compared to the previous month, coordinated prices were down 0.2%. A Reuters poll had expected the reading to be steady.

The European Central Bank aims to keep inflation near or below 2% in the European single currency area.