German inflation dropped to its lowest level in five years in January, official data shows.
The measure of consumer prices showed inflation was 0.9% in January from 1.1% the month before. Month-on-month prices were down half a percent.

The figures from the Federal Statistics Office reveal that German inflation has now slowed for the sixth month running, highlighting growing fears of deflation in Europe's biggest economy.

But Alexander Koch, an economist with Unicredit bank told Reuters that the price falls should be seen as "healthy disinflation" at this point and that they add to consumers' spending power as goods are cheaper.

He added however: "Worrisome deflation remains a risk scenario. Only if the global recession continues or even deepens in the second half of the year, (would) the probability for sustained deflation...rise substantially."

Bundesbank President Axel Weber said earlier this week that negative German inflation rates were likely in coming months.

And the Bank of Spain said yesterday that eurozone inflation could fall close to zero around the middle of this year, before rising again later in 2009.

Robin Bowman