Europe's Largest Economy Is Officially In Deflation

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Europe's Largest Economy Is Officially In Deflation  Germany's consumer price index fell 0.3% month-over-month in January. It's the first time the inflation rate went negative since September 2009. "Deflation has arrived," Pantheon Macroeconomics' Claus Vistesen said. Deflation is a very scary phenomenon. When prices fall, consumers and businesses often hold back on purchases hoping for even lower prices. Economic activity seizes and prices continue to fall in a self-reinforcing cycle. Germany's negative CPI number was largely due to the ongoing plunge in energy prices, which were down 9.9% year-over-year. But other price are slowing or dropping, too. "The decline in food prices also accelerated to -1.3% in January from -1.2% in December," Vistesen noted. "Services inflation fell to 1.2% from 1.4% last month and rents declined to 1.3% year-over-year from 1.4% last month." Read »

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