German inflation slows to two-and-half year low in February

Inflation in Germany, Europe's biggest economy, slowed to its lowest level in two and half years in February, official data showed on Thursday.

The cost of living in Germany increased by 1.5 percent on a 12-month basis this month, down from 1.7 percent in January, the federal statistics office Destatis calculated in a preliminary estimate.

The last time, the annual inflation rate was lower was in October 2010, when it had stood at 1.3 percent.

Using the Harmonised Index of Consumer Prices (HICP), the ECB's inflation yardstick, the rate of inflation in Germany also eased to 1.8 percent in February from 1.9 percent in January, Destatis said.

The ECB defines price stability as increases in HICP of close to but just below 2.0 percent.

Preliminary inflation data are calculated using consumer price data for six of Germany's 16 federal states.

Final data, based on statistics for all 16 states, are scheduled to be published on March 12.

Destatis gave no indication as to the cause of the slowdown in inflation this month.

But Newedge Strategy analyst Annalisa Piazza said the regional data pointed to moderating price pressures from food and consumer goods.

And "the overall picture of moderating inflation remains intact," Piazza said.

Postbank Research economist Thilo Heidrich said he expected slowing inflation to bottom out in the coming months as the economic recovery gathers steam.

"It should settle down at just under 2.0 percent. For the whole of 2013, we're projecting an annual average of 1.7 percent," Heidrich said.

By contrast, Jennifer McKeown at Capital Economics said she saw German inflation "falling to below 1.0 percent before the end of this year as energy inflation slows and the core rate remains subdued."