Inflation data expected after the world’s 4th largest economy narrowly misses recession

Germany’s central bank will release monthly inflation data today. Forecasters are anticipating a consumer price inflation rate of 1.3% year-on-year

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Photo: Reuters

Germany’s central bank will release monthly inflation data today. Forecasters are anticipating a consumer price inflation rate of 1.3% year-on-year for December 2019. The previous month saw inflation at 1.1%, unchanged from October and the lowest level since February 2018.

The uptick comes as the country faces an uncertain fiscal future in the year ahead, having narrowly avoided a technical recession in 2019. Germany’s governing Christian Democratic Union (CDU) party has championed fiscal responsibility and emphasised the importance of a balanced budget. But opposition lawmakers are calling on the government to introduce stimulus measures, raise public spending and more seriously address environmental concerns.

Two major factors will set the course for Germany’s fiscal future. The first is anticipated political turbulence. New left-leaning leadership in the CDU’s coalition partner, the Social Democratic Party, has raised concerns of a collapse of the governing “grand coalition”. Such a fall could see a redistribution of power in the Bundestag and a halt to the CDU’s fiscally conservative approach to governing.

The second factor is the economy itself. More troubling numbers out of Germany’s vulnerable manufacturing sector and a renewal of recession fears could increase the weight of opposition calls for new stimulus measures for sluggish industries, such as the auto sector.

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