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Euro rise dents German confidence

Germany - Worries grow
Germany - Worries grow

Prospects for Germany's economy over the next six months declined in November for the fourth
straight month, according to a survey published this morning.

An index compiled by the ZEW institute fell from 17.4 to 13.9, the lowest level for two years. 'The growing pessimism reflects a slowdown in the world economy and the recent surge in the value of the euro,' the institute said.

Figures released this morning also show that the annual rate of German inflation hit 2% in October, up from 1.9% the previous month, mainly because of high oil prices, particularly for heating fuel.

The national statistics office Destatis said prices rose by 0.2% compared with September. Higher oil prices were the main reason for the increases, with the cost of heating fuel soaring by 40.5% on the year.

When the petroleum sector was stripped out, inflation fell to an annualised 1.4%.

The European Central Bank, which has set 2% as its medium-range inflation target, warned last week that it was concerned about the outlook for inflation in the euro zone after it reached 2.5% in October.

Economists argue however that the dollar's fall in value against the single European currency provides a buffer against inflation since products such as oil are billed in the US currency.