Germany's inflation soars to highest since 2013 while France posts steady increase

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Strong food price rises boosted German inflation (Source: Getty)

Inflation in Germany more than doubled in December 2016 while France also posted an increase, in a sign of further economic recovery in the Eurozone which will be welcomed by the European Central Bank (ECB).

German consumer prices soared by 0.7 per cent compared to November, bringing the annual rate of increase to 1.7 per cent, according to the country's Federal Statistics Office. This represents Germany's highest rate of inflation since 2013.

France’s inflation rate also rose to 0.6 per cent, an increase of 0.1 percentage points.

Read more: Eurozone inflation reaches highest point in 2.5 years

Prices in the Eurozone’s second largest economy have recovered steadily from three months of disinflation in early 2016.

The broad-based rise in Germany was driven in part by rising oil prices feeding into motor fuel, as well as a 2.5 per cent annual increase in food prices compared to December 2015.

The increase will be closely watched by the ECB, which is mandated to keep inflation at a target rate near but below two per cent.

Inflation in Europe has stayed stubbornly low since the Eurozone crisis. Recent months have seen a gradual but steady increase in prices across most of the Eurozone.

Read more: Draghi urges EU to seize opportunity to boost productivity

The measure for the Eurozone as a whole, to be updated on Wednesday, has increased from disinflation at the start of 2016 to reach 0.6 per cent in November. It is expected to expand further.

ECB president Mario Draghi has repeatedly claimed that the ECB’s policy of ultra-low interest rates has been an integral factor in the Eurozone’s recovery. In December he strongly resisted descriptions of the slowing pace of quantitative easing as “tapering”, insisting the central bank is committed to raising inflation.

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