GERMAN INFLATION HIGHER THAN EXPECTATIONS

 German inflation was higher than expected in November, in annual terms, owing to price rises in the services sector and despite another drop in energy costs.

Consumer prices in Europe's largest economy rose 0.2% on the month, pushing up the annual inflation rate to 1.3% this month from 1.2% in October, the federal statistics office said Thursday in a preliminary report.

Economists polled by The Wall Street Journal had expected the annual rate to remain unchanged.

In European Union harmonized terms, consumer prices rose 0.2% on the month, pushing up the annual inflation rate to 1.6% in November from 1.2% in October, which is slightly higher than many economists had expected, but is still below the European Central Bank's target.

The ECB aims to keep inflation in the entire euro zone at just below 2% over the medium term.

Inflation figures have assumed a greater importance for investors after soft euro-area inflation for October had prompted the ECB to cut interest rates.

Evelyn Herrmann, an economist at BNP Paribas, forecast that German consumer price inflation will remain broadly stable next year.

"Domestic drivers, such as unit labor costs, will push up inflation somewhat. But that will be offset by the dis-inflationary trend elsewhere in the euro zone feeding through to German inflation via import prices," Ms. Herrmann said.