For months, high inflation has been causing problems for people in Germany. Now the trend is down. However, consumer advocates see no reason for the all-clear.
Despite falling again in May, high inflation remains a burden for people in Germany. “The consumer crisis is far from over,” said the head of the Federal Association of Consumer Organizations (vzbv), Ramona Pop, of the German Press Agency. “Financial worries force people to save in all areas of everyday life: from energy consumption to travel.”
According to a Forsa survey commissioned by the association, 44 percent of Germans say they also limit themselves when buying food. In the survey last year, it was 35 percent.
After all, consumer price inflation has slowed for the third month in a row. In May, inflation in Germany fell significantly to 6.1 percent, and the annual inflation rate fell to its lowest level since March 2022 when it was 5.9 percent. The Federal Statistical Office confirmed its provisional figures from the end of May on Tuesday. “The inflation rate has thus continued to weaken, but remains at a high level,” said Ruth Brand, head of the agency.
Food is the biggest price driver
According to calculations by the Wiesbaden statisticians, the prices for both food and energy rose much less than in April of the current year. Food, which continues to be the strongest price driver, was 14.9 percent more expensive in May 2023 than a year earlier. In April, food prices were still 17.2 percent higher than in the same month last year.
Dairy products (up 28.2 percent), bread and cereal products (up 19.3 percent) and fish (up 19.0 percent) were more expensive in May than a year ago. Edible fats were cheaper, in particular as a result of the drop in butter prices (minus 23.3 percent).
The rise in energy prices weakened significantly: in May 2023, energy prices were 2.6 percent higher than in the same month last year. In April it was 6.8 percent. The federal government is trying to relieve the burden: the price brakes that apply retrospectively to January 1 are intended to make natural gas, electricity and district heating more affordable. However, natural gas (plus 25.6 percent), electricity (plus 12.7 percent) and district heating (plus 11.4 percent) were still significantly more expensive than a year earlier. In contrast, the prices for fuel (minus 14.2 percent) and heating oil (minus 30.5 percent) fell.
The introduction of the Deutschlandticket on May 1 had a price-dampening effect. As a result, many people had to spend less money on commuting to work and other journeys on local public transport. The combined tickets for train and bus were cheaper by 22.9 percent.
Many people limit themselves
High inflation has been weighing on consumers for months. It saps purchasing power, people can afford less for one euro. Many people limit themselves because of high prices, as the survey for the consumer centers confirmed. According to this, 76 percent save on energy consumption after 78 percent in the survey a year ago. 61 percent are currently holding back on visiting bars and restaurants, compared to 53 percent previously. Accordingly, 56 percent save on vacation and travel after 50 percent previously.
At least inflation in Germany seems to have peaked. In March of the current year, the inflation rate at 7.4 percent was below the 8 percent mark for the first time since August 2022. The Federal Office had calculated an inflation rate of 7.2 percent for April. According to the calculations, consumer prices fell by 0.1 percent from April to May of the current year.
“The trend of falling inflation rates should continue until the end of the year,” predicted the scientific director of the Institute for Macroeconomics and Business Cycle Research (IMK) of the trade union-affiliated Hans Böckler Foundation, Sebastian Dullien. “However, due to the high inflation at the beginning of the year, inflation in 2023 as a whole is likely to be more than 5 percent.”
Low-income people need help
Food and energy in particular are still price drivers. Excluding these two items, the inflation rate in May was 5.4 percent. “People with low incomes in particular need help. The price brakes for energy were a first step. The abolition of VAT on healthy food must be the next step,” demanded vzbv board member Pop.
Dullien analyzed: “Although core inflation excluding energy and food is still uncomfortably high, an easing can be expected here in the coming months.” Wholesale energy prices are currently falling, “which should soon be reflected in the prices of other goods and services.”
Other economists recently warned not to give the all-clear too early. Inflation in many services, driven by rising wage costs, is only just getting going. “In the summer months, consumers will feel this strongly in the prices for tourism services,” predicted Friedrich Heinemann from the ZEW – Leibniz Center for European Economic Research in Mannheim at the end of May the – now confirmed – preliminary figures from the Federal Statistical Office.
Source: Stern
