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Friday 17th of April 2009
April 15, 2009

German wholesale prices at a 22-year low


by Peter Charalambous
”German

German wholesale prices in March have fallen by the greatest margin in over 22 years, as both energy prices and agricultural prices have fallen since inflation in Germany is at a 10-year low.

In the midst of the worst recession since the Second World War, prices have fallen by 8 percent form last year and experienced a 5.7 percent fall in February, whilst in March prices fell a further 0.9 percent.

Consumer price inflation (CPI) has now fallen to just 0.5 percent and analysts are predicting that CPI will turn negative before the summer before rebounding.

As deflationary fears have increased, the focus is on further monetary easing, although in the period the European Central Bank has reduced interest rates by 1.25 percent.

The fall in consumer prices has alerted fears that the collapse of production will only escalate, and that firms will reach breaking point and slash prices in order to attract new orders.

In order to avert such a crisis, the German government has made certain moves such as the plan to spend 80 billion euros to help boost consumer spending power, as well as tax breaks and other incentives, in order to persuade consumers that now is the best time to buy a new car.

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