Page last updated at 15:46 GMT, Wednesday, 29 July 2009 16:46 UK

Consumer prices fall in Germany

A shopping arcade in Hamburg, Germany
There have been tentative signs that the German economy is picking up

German consumer prices fell for the first time in 22 years in July, official figures have shown.

Prices fell 0.6% in July from a year earlier - the first fall since March 1987, when they declined by 0.3%.

The decline was largely due to falls in energy prices, which peaked in summer 2008, and analysts said Germany was unlikely to see a deflationary spiral.

Prices can fall for a short time without hurting the economy, but prolonged declines can be damaging.

Dirk Schumacher, an analyst at Goldman Sachs, said that the falling prices could help the economy in the short term.

"Falling prices are aiding consumer confidence and purchasing power. That's aiding consumption," he said.

"This is not deflation. We're still far away from that. It's no cause for alarm," he added.

The preliminary figures are based on data from six of Germany's 16 states. Definitive figures will be published in August.

Germany is facing its worst economic downturn since World War II. The economy is expected to contract by 6% this year.

However, there have been tentative signs that the economy is picking up.

Confidence among consumers and companies has risen, and the decline in exports had begun to ease.

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