Inflation in Germany remains above six percent. Food in particular drives prices up. Hauke-Christian Dittrich/picture alliance via Getty Images
Inflation in Germany is stubbornly staying at a level that is too high. In July, consumer prices were 6.2 percent higher than a year ago.
The Federal Statistical Office announced that food is the biggest price driver.
High inflation is putting pressure on the already shaky economy. Consumers lack the purchasing power to stimulate the economy with more consumption. Improvement is in sight in autumn.
Inflation in Germany remains stubbornly high. The inflation rate fell only minimally from 6.4 to 6.2 percent in July. The Federal Statistical Office confirmed a first estimate on Tuesday. The sharply rising prices are an important burden for the ailing economy. For many households, the purchasing power of their income is falling. This slows down consumption and thus the economy. The economic crisis is increasingly calling politicians to the scene who are demanding government economic stimulus packages.
“The inflation rate has weakened somewhat, but remains at a high level,” said the President of the Federal Statistical Office, Ruth Brand. Food prices in particular drove inflation. “Moreover, energy prices increased somewhat more than in the two previous months,” said Brand. There is a base effect here because a year ago the elimination of the surcharge for renewable energies had dampened electricity prices. The fuel discount and the 9-euro ticket had lowered prices a year ago, but the year-on-year price increase is now higher.
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But even without such special effects, price dynamics are still high. This is shown by two other figures: Compared to the previous month of July, consumer prices rose by 0.3 percent in July. And the core rate of inflation for all prices except energy and food also fell only slightly, from 5.8 to 5.5 percent. Basically, inflation is still at a level that has rarely been seen in the history of the Federal Republic.
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Energy prices are rising a little faster again
Energy was 5.7 percent more expensive in July than a year ago. The energy prices rose again somewhat more strongly than in Mia and June with approximately three per cent. “The price development of electricity was particularly striking,” write the statisticians. Electricity was 17.6 percent more expensive than in July 2022 after a good ten percent in June. The increase is essentially due to the omission of the EEG surcharge due on July 1, 2022.
Solid fuels were still almost 13 percent more expensive in July than a year ago, natural gas by 8.5 percent. On the other hand, prices for district heating rose below average (plus 2.1 percent). Mineral oil products were even almost eight percent cheaper than a year ago. As a result, petrol and diesel were five percent cheaper than even though the tank discount had applied a year ago.
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Food is the biggest price driver
Food prices increased by eleven in July 2023 compared to the same month last year. The inflation was at least a little lower than the almost 14 percent in June. Food remains the strongest price driver. Almost all food groups were more expensive than a year earlier. The prices for sugar, jam, honey and other confectionery rose particularly sharply by 19 percent. Bread and grain products, vegetables, as well as fish, fish products and seafood also became noticeably more expensive. On the other hand, edible fats and oils were 13 percent cheaper than a year earlier.
Rents hardly increase and dampen inflation
In July 2023, the prices for services as a whole were 5.2 percent higher than in the same month of the previous year. It is significant that rents – measured in terms of net cold rents – are increasing only slowly at 2.1 percent. That dampens inflation. “The introduction of the Deutschlandticket has also had a slightly dampening effect on price developments since May 2023,” write the statisticians.
That is why the inflation rate is likely to fall in autumn
The inflation rate in Germany is likely to drop noticeably from late summer. Then the basic effects of the tank discount and the 9-euro ticket will no longer apply. An easing of energy prices is also expected. At upstream economic levels, such as imports, producers or wholesale, prices are already more or less stable. Because wages and salaries have risen significantly in many sectors at the same time, economists expect real wages to rise again soon. Hopes for an economic recovery rest on the growing purchasing power. At the same time, however, this makes persistently high inflation the greatest risk.
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