RTTNews - The German annual inflation rate in May reached the lowest level since 1987 on easing energy and food prices.

Annual inflation remained flat in May, following April's 0.7%, a final report from the Federal Statistical Office showed Wednesday. A year ago, the rate was 3%.

Month-on-month, the consumer price index was down 0.1% versus a zero reading in the previous month. The statistical office thus confirmed the initial estimates for CPI released on May 27.

The low inflation rate was mainly due to the high price level seen in the previous year. Energy prices were down 8% from May 2008. Other liquid fuels and motor fuels recorded 42.4% and 16.9% annual price decline, respectively. But households energy costs such as gas prices increased 3.6% and electricity charges went up 6.9%.

Food prices were 1.2% lower than the previous year in May. The rate of increase in food prices has been slowing since August 2008. Among other goods, consumer durable prices dropped 0.2% in May. At the same time, prices of services climbed 1.3%.

Energy products and food constitute 20% of household expenditure in Germany. Excluding these volatile items, the annual inflation rate was 1.4% in May.

The harmonized index of consumer prices, which is calculated for European Union purposes, remained unchanged in May from a year earlier. According to the initial estimate, the index had fallen 0.1%, following a 0.8% increase in April. Compared with the previous month, the index slipped 0.1%, revised up from the 0.2% decline estimated earlier.

On June 5, the Bundesbank said consumer price annual inflation will temporarily enter negative territory over the next few months in Germany. Inflation in 2009 is forecast to be at 0.1%, after which it is expected to rise to 0.5%.

Annual inflation in the EU 16 also remained flat in May versus 0.6% in April, which was the lowest since records began in 1996. Economists expect consumer price inflation to pick up moderately in autumn. However, the fundamental economic outlook indicates a low inflation environment for a longer period.

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