Germany’s inflation misses forecasts in November: Bund yields fall

Germany’s annual inflation rate edged higher in November but came in below economists’ expectations, while its monthly inflation posted the sharpest decline in a year, signalling that the disinflationary trend remains intact.

The Federal Statistical Office reported on Thursday that consumer prices rose by 2.2% year-on-year in November, up from 2.0% in October, but slightly below forecasts of 2.3%. On a monthly basis, the consumer price index (CPI) fell by 0.2%, marking the largest monthly decline since November 2023.

Energy prices continued to exert a downward pressure on the consumer basket, falling 3.7% year-on-year in November, albeit showing a slower decline compared to 5.5% year-on-year drop in October.

However, the cost of services maintained upward pressure, with services inflation remaining steady at 4% year-on-year.

Core inflation, which excludes volatile components such as food and energy, is projected to have increased to 3.0% year-on-year in November, up from 2.9% in October and reaching its highest level since May.

The Harmonized Index of Consumer Prices (HICP), a metric used for eurozone-wide comparisons, remained steady at 2.4% year-on-year, below the anticipated increase to 2.6%.

Monthly harmonized inflation data showed a sharp 0.7% decline, the largest contraction in harmonised consumer prices in Germany over the past year, and steeper than the expected 0.5% drop.

Market reactions

Germany’s inflation data had little immediate impact on financial markets during a quiet trading session, as U.S. markets remained closed for the Thanksgiving holiday.

Bund yields fell slightly by 2 basis points to 2.14%, extending their losing streak to six consecutive sessions and reaching levels last seen in early October 2023. Investors have gravitated toward safe-haven German government bonds in recent days, driven by concerns over an economic slowdown and disruptions from U.S. tariffs.

Germany’s DAX index rose 0.5%, recovering from a two-day losing streak.

Among the top performers in the DAX were Airbus (+3.6%), Daimler Truck Holding AG (+2.6%), and RWE (+2.1%). The biggest laggards included Fresenius Medical Care (-1.9%) and Symrise (-1.1%).

The Euro Stoxx 50 index also gained 0.5%, supported by a strong performance from ASML Holding N.V., which rose 3.1%, and European banks. Notable gains included Banco Sabadell (+1.2%), ING Groep (+1.1%), and Deutsche Bank (+1%).