German inflation expected to more than double in Dec
German annual inflation probably more than doubled in December, hitting what would be the highest level in more than three years and giving a welcome boost to the European Central Bank, regional data suggested on Tuesday.
Conversely, it may put a damper on Germans' appetite for spending.
Non-harmonized inflation data from five federal states showed that prices had increased by at least 1.7 percent year-on-year at the end of 2016.
This is close to the European Central Bank's inflation target of near 2 percent. The number for Germany as a whole id due later on Tuesday.
The ECB has been pouring money into the euro zone economy in an attempt to boost inflation from a near-deflationary level, so Tuesday's strong data is likely to intensify calls from fiscal conservatives on the bank to start reversing its policy.
DZ Bank economist Michael Holstein said the state data suggested that German EU-harmonized consumer prices overall rose by 1.5 percent on the year.
This would be the highest annual inflation rate since November 2013 and it would also be higher than a Reuters consensus forecast for a rise to 1.3 percent after 0.7 percent in November.
Consumer prices in the 19-country euro zone rose 0.6 percent in November. For December, economists expect the euro zone figure, due on Wednesday, to rise to 1.0 percent on the year.
Rising prices may be good news from the ECB from a pan-euro zone perspective, but they do not necessarily bode well for the German economy. It has been relying on private consumption, a booming construction sector and government spending for growth.
Private consumption and construction have been boosted by the ECB's low-interest rates and record-high employment and rising price pressures would make traditionally frugal Germans more reluctant to take their wallets out.
German government bond yields nudged up from two-month lows as investors anticipated that the data would show sharply rising consumer prices.
Still, economists expect Germany's labor market to remain robust in 2017.
The Federal Labour Office said on Tuesday that unemployment fell more than expected in December, keeping the jobless rate in Europe's biggest economy at a record low.
"The positive development related to unemployment continued at the end of the year," Frank-Juergen Weise, head of the Federal Labour Office, said.
"The strong increase in employment that has been going on for a long time slowed since the summer months, but demand for new workers remains at a high level," he added.
The seasonally adjusted jobless total fell by 17,000 to 2.638 million, the Labour Office said. That was more than three fold the 5,000 forecast in a Reuters poll.
The adjusted unemployment rate remained at 6.0 percent, the lowest level since German reunification in 1990.
In 2016 as a whole, a record 43.4 million people were employed in Germany - 1 percent more than in 2015 and the tenth year in a row that the workforce expanded.
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