German Inflation At 22-Year Low

FRANKFURT (AP) -- Inflation in Germany, Europe's biggest economy, fell to its lowest in 22 years in May as manufacturers' revenues dropped and business failures increased, the Federal Statistical Office said Wednesday.

The Wiesbaden-based office said the consumer price inflation rate fell to zero in May on an annual basis, down from 0.7 percent in April. That was mainly due to higher energy and food prices a year earlier, but also suggests consumers are buying less, causing retailers to slash prices.

Energy prices fell about 8 percent, while food prices slid 1.2 percent compared to year-ago levels.

In a separate release, the office said revenues in the manufacturing sector fell 23 percent in April over the same month the previous year, as people and businesses curbed spending.

The latest evidence of weakness in the German economy came after the agency reported Tuesday that exports dropped 4.8 percent in April from March, and were down 28.7 percent from the year before. The fall was the largest since Germany went into recession in last year's third quarter.

The German Institute for Economic Research, or DIW, on Wednesday revised its forecast for German economic output, saying it would drop 7 percent in the second quarter -- worse than previously predicted.

The government has said it expects a contraction for the year of 6 percent, while the central bank, the Bundesbank, has predicted the economy will contract by 6.2 percent.

On Wednesday, the Statistical Office also said the manufacturing sector saw domestic sales in April fall by more than 17 percent, while foreign business fell nearly 30 percent. In the first four months of the year, manufacturing sales fell 22 percent compared with the year-earlier period.

The biggest decline came in the auto and auto parts sector, which saw a decline in April of more than 37 percent over the same month the year before.

The recession contributed to a 10 percent increase in businesses filing for bankruptcy protection during the first quarter.

The Statistical Office said that in the January-March period, German insolvency courts in 15 of the country's 16 states reported about 7,700 business insolvencies compared to about 7,000 in the year-ago period.

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