German consumer prices fell in January despite increase in VAT rate

The German Federal Statistical Office De Statis, reported today that the consumer price index for Germany is expected to increase 1.6% in January 2007 compared with January 2006, based on the results available from six Länder (December 2006: +1.4%).

Compared with the previous month, a -0.2% rate of change was reported in January.

An effect of the VAT rise on 1 January 2007 can only marginally be observed in the results. Theoretically, if the VAT rise had fully and immediately been passed on to private final consumers, an additional increase in the year-on-year rate of price increase by 1.4 percentage points would have been possible. According to the provisional results, however, the year-on-year rate of price increase was up by just 0.2 percentage points, that is from 1.4% in December 2006 to 1.6% in January 2007.

Source: finfacts.com