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German PPI Sinks to Lowest Level Since 2004

German producer price inflation dropped last month to its lowest level since early 2004, pushed down by falling energy prices, according to government figures released Friday.

Producer prices, a measure of price pressures at the factory gate seen as an important gauge of inflation before it reaches consumers, were up 1.1% from July 2006.

That was the lowest reading since April 2004, when the annual inflation rate stood at 0.9%, the Federal Statistics Office said. Producer prices slipped by 0.1% compared with the previous month.

The year-on-year rate was short of the 1.4% forecast of analysts surveyed by Dow Jones Newswires. It compared with a rate of 1.7% in June and 3.2% as recently as January.

Energy prices were down 2.8% on the year in July, while prices of oil products were 2.6 % lower.

Inflation data from Germany, Europe's biggest economy, are important to interest rate decisions by the European Central Bank.

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