A small glimmer of hope for consumers in Germany: After the recent increase, inflation weakened again somewhat in July. Consumer prices rose by 6.2 percent compared to the same month last year, as the Federal Statistical Office announced on Friday in an initial estimate. In June, the annual inflation rate was 6.4 percent, down from 6.1 percent in May.
High inflation has been a burden for consumers for months. It saps their purchasing power. People can afford less for one euro. Many limit their consumption. This has consequences for the economy, for which private consumption is an important pillar.
Food continues to drive up prices
Price drivers in July were again food, which rose by 11.0 percent compared to the same month last year. After all, prices rose less than in June (13.7 percent).
At 5.7 percent, energy prices increased slightly more than in June. The reason for this is a special effect due to the elimination of the EEG surcharge on July 1, 2022. The federal government is trying to reduce energy prices: the price brakes for natural gas, electricity and district heating that apply retroactively to January 1 are intended to dampen the increase.
According to data from the state statistical offices, in July people had to pay significantly more than a year earlier for visits to restaurants, overnight stays in hotels and guesthouses and for package tours.
In the previous year, the 9-euro ticket for local transport introduced in June 2022 and limited to three months temporarily dampened price increases. This effect does not apply this year. The Germany ticket launched in May 2023 is significantly more expensive at 49 euros.
Analysts expect relaxation
In the coming months, most analysts are anticipating an increasing easing in prices. “We assume that the German inflation rate will fall to around three percent towards the end of the year,” said ING chief economist Carsten Brzeski. The European Central Bank (ECB), which raised its key interest rate for the ninth time in a row on Thursday – to the highest level since 2000 – is likely to contribute to this.
A current survey by the Munich Ifo Institute indicates that inflation will decline rather slowly. The so-called price expectations of companies increased again for the first time since last autumn. Accordingly, further price increases are in sight, especially in the retail and food trade. In the manufacturing industry, however, the price increase has probably stopped.
Inflation is now a long way from its highest level since reunification at 8.8 percent in autumn 2022. Compared to June, consumer prices rose by a total of 0.3 percent in July.
ul/dk (dpa, rtr)