Wiesbaden, Germany, March 24 (Bloomberg) -- German import prices rose for a third month in February as the price of oil increased before the start of the U.S-led war in Iraq. Import prices gained 0.6 percent from January, the Federal Statistics Office said. Analysts had forecast 0.7 percent. Excluding oil-based products, import prices rose 0.1 percent. From a year earlier, prices advanced 0.6 percent. The European Central Bank said inflation is under control as the stronger euro offsets higher oil prices and sluggish economic growth holds businesses back from raising prices. The price of crude has gained as much as 18 percent this year on concern the war in Iraq would disrupt supplies. ``Inflation is currently not an issue'' in Germany, said Carsten Klude, an economist at M.M. Warburg & Co. in Hamburg. ``Inflation is not something that will hold the ECB back'' from cutting rates. Oil prices reached a 12-year high earlier this month, increasing the cost of oil-based materials. BASF AG, Europe's biggest chemical maker, said last week a war would bring ``stagnation in global growth.'' The annual increase in import prices was led by motor fuel, heating oil and crude oil, which all gained by more than 34 percent. Iron, steel and cocoa prices also rose.
Euro's Appreciation
Inflation may wane in coming months should the war in Iraq be swift. The price of crude has lost almost a quarter of its value since the start of the month as some investors bet the U.S. would secure oil fields quickly and avoid supply disruptions. Crude recently traded at $24.77 a barrel. Import prices, excluding oil products, dropped 2.3 percent from a year earlier. German export prices rose 0.3 percent in February from a month before and 0.9 percent compared with a year earlier. The euro's 20 percent gain against the dollar in the past year is offsetting some of the oil price gains and should help bring inflation below the ECB's 2 percent limit this year, the central bank has said. Consumer price reports from six German states in the next couple of days may also show that inflation is under control. Consumer prices probably rose 0.2 percent in the month to mid- March from the previous four-week period, based on the median forecast of 21 economists surveyed by Bloomberg News. The annual inflation rate is seen unchanged at 1.3 percent.
Struggling to Grow
Germany's economy may not grow enough this year to encourage businesses to raise prices. Five of Germany's six leading economic research institutes have lowered their forecasts for growth this year. Deutsche Lufthansa AG this month cut fares to five European cities, even as rising oil prices boost fuel costs. The ECB is seeking to spur economic growth in the 12 states sharing the euro and earlier this month lowered borrowing costs for the second time in four month by 25 basis points to 2.50 percent. The rate on a three-month euro deposit maturing in June was at 2.38 percent at 9:09 a.m. in Frankfurt, compared with a money market rate of 2.54 percent. A basis point is 0.01 percentage point. ECB President Wim Duisenberg said on Thursday the central bank is prepared to act to bolster growth and stabilize financial markets in case the Iraq war deals a further blow to the economy.//www.quote.bloomberg.com