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Inflation slowed more than expected in June in Germany

Inflation in Germany slowed slightly more than expected in June according to first estimates released Monday, a move that could fuel concerns about possible deflationary risks threatening the euro area.

Consumer prices rose 0.9% yoy according to preliminary federal statistics, whereas their increase had reached 1.2% in May

Economists polled by Reuters last week had forecast an average price increase of 1.0% over one year.

This slowdown is largely due to lower gas prices, said the Federal Office of Statistics.

From month to month, inflation in Germany remained stable at 0.1%.

"The German economy appears to have avoided a deflation proper form but was still struggling to collect inflationary pressures," said Carsten Brzeski, economist at ING Financial Markets.

The slowdown in inflation in June coincided with the debate on the impact of German austerity plan on the other countries of the euro area.

Chancellor Angela Merkel presented in early action expected to generate 80 billion euros in budget savings over the next four years, in order to achieve by 2013 the German structural deficit within the limits set by the EU European.

Across the eurozone, inflation should slow to 1.5% yoy in June, against 1.6% in May

Details of the German statistics show that consumer prices calculated at European harmonized standards (HICP) remained stable in June compared to MayOn a year they show an increase of 0.8%, against 1.2% in May

These figures could provide an argument with officials of the European Central Bank (ECB) who argue for a continuation of measures to support the economy.

"We expect German inflation (annual rate) will end the year close to zero and there is some probability that it returns into negative territory," said Jennifer McKeown of Capital Economics.

"While many peripheral economies of the euro area are moving toward a long period of deflation, the ECB has every reason to maintain an attitude of a dove," she adds.

The first estimate of inflation over the past month is calculated based on published data from six Länder.The annual inflation has slowed in each of them in June