Eurostat’s harmonised index of consumer prices climbed by 0.9 per cent year-on-year in January, reversing a 0.3 per cent fall in December, and increasing for the first time in six months since July, when the index was up 0.4 per cent.
Excluding energy, food, alcohol and tobacco, core inflation accelerated to 1.4 per cent from 0.2 per cent. In January, the highest contribution to the annual inflation rate came from services, followed by non-energy industrial goods, food, alcohol and tobacco and energy.
Month-on-month, consumer prices gained 0.2 per cent. A year earlier, the rate was 1.4 per cent.
The German economy expanded more than initially estimated in the fourth quarter driven by construction investment and exports.
Gross domestic product grew 0.3 per cent in the fourth quarter compared to 0.1 per cent initial estimate. However, this was much slower than the 8.5 per cent rebound seen in the third quarter due to the renewed lockdown at the end of the year. On a yearly basis, the decline in German GDP slowed to 3.7 per cent from four per cent.
Due to the second lockdown, private consumption dropped 3.3 per cent but this was far less than the 11 per cent fall posted during the first lockdown. Government spending also decreased 0.5 per cent.
Construction investment was up 1.8 per cent, exports increased 4.5 per cent and imports climbed 3.7 per cent. The statistics office revised its full year GDP estimate for 2020 to -4.9 per cent from -5 per cent.
In its latest monthly report, the Bundesbank stated that the German economy is likely to recover from this spring after an estimated contraction in the first quarter of 2021.
The UK unemployment rate rose to a near five-year high in the fourth quarter as the coronavirus pandemic continued to weigh on the labour market amid the ongoing tight restrictions. The jobless rate rose by 0.4 per cent on a quarterly basis, to 5.1 per cent, the highest since 2016. The number of people looking for jobs increased by 121,000, while employment declined by 144,000.
In the forthcoming budget, UK Chancellor Rishi Sunak is expected to set out more measures to support jobs through the remainder of the pandemic and help recovery.
However, an expected rapid rebound in GDP in the second half of 2021 should prevent the unemployment rate from reaching global financial crisis highs of 8.4 per cent.
This article has been prepared by Bank of Valletta plc for general information purposes only.