Consumer prices also fell in October – to their lowest level in five and a half years. This is due, among other things, to lower VAT and cheaper energy.

Food prices rose in October.

Dhe lower value added tax and falling energy costs keep the German inflation rate at its lowest level in over five and a half years. Consumer prices fell in October by 0.2 percent compared to the same month last year, as the Federal Statistical Office announced on Thursday.

Annual inflation was at this level in September as well. The last time there was a major decline was in January 2015. For the European Central Bank (ECB), falling prices in the largest economy in the monetary union are a problem, as it aims for an inflation rate of just under two percent.

The federal government will temporarily reduce VAT from 19 to 16 percent from July to the end of 2020 in order to stimulate consumption and the economy during the Corona crisis. “The inflation rate is influenced, among other things, by the VAT cut that has been in effect since July 1, 2020,” it said.

Goods were cheaper in October by an average of 1.5 percent. Energy prices fell particularly sharply at minus 6.8 percent. Food prices rose by 1.4 percent, a little more than recently. Services cost 1.0 percent more than a year earlier, with net rents increasing by 1.3 percent.