Energy price jumps and increased food prices are putting a strain on consumer budgets. Inflation remains elevated despite moderating slightly. Politicians are discussing further relief.
Inflation in Germany is stubbornly above the seven percent mark, despite relief from the 9-euro ticket and fuel discount. Higher inflation rates reduce the purchasing power of consumers because they can afford less for one euro.
According to an analysis, people now have to work longer than they did two years ago in order to be able to buy certain products. According to economists, consumers cannot hope for a sustained decline in inflation for the time being – on the contrary.
Consumer prices rose by 7.5 percent in July compared to the same month last year. The Federal Statistical Office thus confirmed an initial estimate. In June the annual rate of inflation was still 7.6 percent and in May even 7.9 percent. The upward trend in prices thus weakened somewhat for the second month in a row.
In addition to the introduction of the 9-euro ticket in public transport and the tank discount at the beginning of June, the abolition of the EEG surcharge on July 1 also provided some relief. Since then, electricity customers no longer have to pay for the promotion of green electricity via their electricity bill.
Energy and food are the price drivers
Above all, price jumps in energy as a result of the Ukraine war and rising food prices have been heating up inflation in Europe’s largest economy for some time. In July, energy cost a total of 35.5 percent more than a year earlier. Food prices increased by 14.8 percent within a year.
According to economists, people in Germany will have to brace themselves for rising inflation rates in the coming months, also because the fuel discount and 9-euro ticket are limited to the end of August. There is still a struggle in Berlin about a possible follow-up offer for the cheap ticket. In addition, gas customers are threatened with higher prices from autumn due to the gas surcharge, which enables gas suppliers to pass on additional costs to consumers.
48 million are to be relieved
Further measures to relieve consumers are being discussed. Finance Minister Christian Lindner wants to relieve 48 million citizens of taxes. Overall, they should save more than ten billion euros in the coming year, as the FDP politician said in Berlin: “Pensioners, employees subject to social security contributions, the self-employed: people across the board are affected.”
In addition to an adjustment of the income tax rate, child benefit and the child allowance are also to be increased. The plans have not yet been agreed in the coalition and are controversial. The taxpayers’ association criticized that it was not a real relief package. The income tax allowances for children and adults would have to be adjusted to the price increase by law anyway.
Inflation rates at the current level have never existed in reunified Germany. In the old federal states, similarly high values were recorded in the winter of 1973/1974 as a result of the first oil crisis.
According to calculations by the German Economic Institute (IW), people today often have to work less long hours than they did around 30 years ago in order to be able to pay for the same products and services. For one hour of work in June 2022, they could on average afford a visit to the cinema, 500 grams of coffee beans, a stamp for a standard letter, a kilogram of mixed bread and a bottle of beer. In 1991 they had to work seven minutes longer for this.
Compared to 2020, however, the so-called purchasing power per wage minute for these products has fallen overall: Two years ago, people only had to work an average of 56 minutes for this. “Since German reunification by 2021, the purchasing power per wage minute has increased by 27 percent,” said Christoph Schröder from the IW. “And now, of course, we already have losses due to the high inflation rate.” The calculations of the IW are based on the price developments for products and services as well as on the net earnings per hour.
Source: Stern
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
