Consumer prices were surprisingly strong in December. With base effects mildly positive, a provisional 0.7 percent monthly rise in the CPI was large enough to add nearly a full percentage point to the yearly inflation rate which now stands at 1.7 percent, its highest level since July 2013.
The acceleration in the CPI was matched by the flash HICP which showed a 1.0 percent increase versus November for also a 1.7 percent yearly rate, up from 0.7 percent last time.
The monthly advance in prices was largely attributable to the more volatile categories. In particular, household energy costs climbed sharply as did food. There was also a hefty jump in package holiday charges (20.9 percent in North Rhine-Westphalia) which was well above the seasonal norm.
The spurt in annual inflation was similarly dominated by energy where the rate climbed from minus 2.7 percent to 2.5 percent. Food (2.5 percent after 1.2 percent) provided a sizeable lift too. More significantly, services climbed 0.4 percentage points to 1.5 percent while rent, ex-utilities edged a tick firmer to also 1.5 percent. Total goods inflation weighed in at 1.8 percent, a 1.3 percentage point jump from November.
The December inflation data are clearly a good deal stronger than anticipated. Food and energy might have done most of the work but part of the overshoot would seem to reflect surprising strength in underlying prices. The ECB will not be displeased and will obviously be hoping that the acceleration in Germany is mirrored elsewhere in the Eurozone.