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German Inflation Rate Climbs Again After Steady 3-Month Decrease

After three months of consistent easing, Germany’s inflation rate is on the rise once again. According to Federal Statistical Office (Destatis), food costs remain the biggest driver of inflation.

German inflation rate rises to 6,4 percent

Monthly figures published by Destatis have revealed that inflation rates lay at 6,4 percent in June, up from 6,1 percent in May. “The rate of inflation therefore increased slightly again after slowing for three months in a row,” Destatis President Ruth Brand said in a press release.

The main explanation for why rates have risen again after a slow but steady decrease between March and May is because of the baseline effect; June 2022 was the month that the 9-euro ticket went on sale, and this time last year also saw the German government provide a fuel discount and an energy relief package to help with rising costs. Both of these policies shaped Germany’s current baseline, “which pushes up the current inflation rate,” Brand explained.

According to Destatis, Germany’s reduced inflation rate in May 2023 was also partly down to the much-awaited 49-euro Deutschlandticket, which was valid to use from May 1 onwards. But the effect has proven to have been much less substantial than the 9-euro ticket. 

“Compared with the introduction of the 9-euro ticket for the months from June to August 2022, the impacts were considerably less pronounced,” the monthly Destatis report explained. “Nonetheless, it did have a slight dampening effect on prices particularly in the services product group. Although the [Deutschlandticket] continues to be valid, a year-on-year increase in service prices was observed in June 2023, especially in the prices for public regional and local passenger transport.”

Food costs remain the biggest driver of inflation

In June 2023, the cost of food was up 13,7 percent in comparison to the same period last year, but was down 0,2 percent from this May. Nonetheless, food prices remain the biggest driver of inflation in Germany.

Of different food products, dairy goods have seen the biggest year-on-year increase, up by 22,3 percent. All the sweet stuff; including confectionery, sugar, jam and honey, has gone up in price by 19,4 percent, while the cost of vegetables has risen by 18,8 percent in comparison to June 2022. 

Economists forecast that a baseline altered by the 9-euro ticket policy during June, July and August of 2022 will continue to increase inflationary pressure throughout the remaining summer months of 2023 before rates fall to around 4 percent this winter.

Source : IAMEXPAT

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