A glimmer of hope for Germany’s consumers: Inflation is still on the decline – but it’s only going down slowly.
The high level of inflation in Germany weakened again somewhat in August. Consumer prices were 6.1 percent above the level of the same month last year, as calculated by the Federal Statistical Office on the basis of provisional data. After rising to 6.4 percent in June, annual inflation fell to 6.2 percent in July. From July to August of the current year, consumer prices are expected to have increased by 0.3 percent, as Wiesbaden statisticians announced on Wednesday.
High inflation is slowing down private consumption, people can afford less for one euro. Energy and food in particular have risen sharply in price in recent months as a result of the Ukraine war.
In August, too, food and energy were sometimes significantly more expensive in Germany than a year earlier. According to preliminary calculations by the statisticians, food prices rose by 9.0 percent within a year. In July, food prices in Germany were 11.0 percent higher than in the same month last year, in June it was 13.7 percent.
Energy prices have risen again
Energy price inflation picked up again: energy prices in August 2023 were 8.3 percent higher than in the same month last year. In July it was 5.7 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.
After all, inflation in Europe’s largest economy is now a long way from its highest level since German reunification at 8.8 percent in autumn 2022. However, economists do not expect a return to a two before the decimal point in the inflation rate until the coming year on average. With medium-term inflation of 2.0 percent in the euro area, the currency watchdogs of the European Central Bank (ECB) believe that they have achieved their goal of stable prices.
The ECB is attempting to curb inflation, which has been high for months, by raising interest rates. Higher interest rates make borrowing more expensive, which can slow demand. Since the summer of 2022, the central bank has raised interest rates nine times in a row. At 4.25 percent, the key interest rate at which commercial banks can get fresh money from the ECB is now as high as it was at the beginning of the global financial crisis in early October 2008. Will there be another interest rate hike at the next ECB meeting on September 14th? Central bank President Christine Lagarde left it open whether there will be or whether the euro currency guardians will take a break.
Source: Stern
