High energy and food prices have been driving inflation for months. There are no signs of a thorough easing in prices for the time being. The inflation rate was 8.7 percent in January.
Cars drive past a price board at a petrol station in the early morning
The rise in consumer prices in Germany accelerated slightly in January. The inflation rate last month was expected to be 8.7 percent compared to January 2022, as the Federal Statistical Office in Wiesbaden announced on Thursday based on preliminary results. In December, inflation was 8.6 percent.
Compared to December, consumer prices are expected to rise by 1.0 percent, the statisticians said. For the time being, they did not provide any further information about price increases for energy or food. The statistical office intends to present the final results on February 22.
The announcement of the inflation rate was postponed last week. The statistical office announced on Thursday that the consumer price index had undergone a regular revision for the reporting month of January and had been converted to the new base year 2020.
New database
Experts had expected the inflation rate to rise at the beginning of the year because the statistical office changed the weighting within the basket used to determine the inflation rate. “Despite the corona pandemic, 2020 was chosen as the new base year, so services, package tours and culture will lose significantly in importance, while household energy and goods will increase significantly,” say BayernLB experts. In addition, many sellers are particularly fond of using the turn of the year to raise prices.
Is the trend going down?
“The increase is probably primarily due to the fact that gas and district heating consumers had to pay full advance payments again in January,” said the chief economist at HQ Trust, Michael Heise . “In addition, there were no further reductions, but slight price increases for fuel.” Only heating oil provided a slight relief in the energy sector.
Reason for the delay: The Federal Statistical Office has recalculated its data basis
For 2023 as a whole, the institute for macroeconomics and business cycle research (IMK), which is close to the trade unions, expects an inflation rate of slightly more than five percent, after the highest value since the founding of the Federal Republic of Germany was measured at 7.9 percent in 2022. “Germany has passed the peak of inflation, and that will increasingly become apparent as the year progresses,” said the Scientific Director of the IMK, Sebastian Dullien.
“All we know is that inflation was 8.7 percent in January,” commented Jörg Kramer, Commerzbank's chief economist. With the reference to the changeover to a new base year, one knows neither the inflation in December nor the possible role of state price brakes for gas and electricity. “However, the downward trend in inflation seen in the old numbers should continue in the coming months as the rise in energy prices is likely to slow further.” But inflation excluding energy and food is likely to remain stubbornly high this year, mainly on the back of rising labor costs. “It's too early to give the all-clear on the inflation front.”
Purchasing power has dropped noticeably
Rising energy and food prices have been driving inflation for months. Higher inflation rates reduce purchasing power, consumers can afford less for one euro. People's financial leeway is shrinking. This can weigh on consumption, which is an important pillar of the economy. Economists are currently not expecting a thorough relaxation in consumer prices in the current year. “It would be dangerous to think that we've already finished and that the inflation problem is over,” Bundesbank President Joachim Nagel recently told the “Börsen-Zeitung”.
The federal government is anticipating an average inflation rate for the current year of 6.0 percent in Europe's largest economy. The electricity and gas price brakes would have a dampening effect. However, the state cannot cushion all consequences. “The real loss of income and purchasing power associated with the high price increases will weigh on domestic economic development, despite the relieving effects of the extensive government support measures,” said the government's most recent annual economic report. Private consumption in particular is likely to drop noticeably.
dk/hb (dpa, afp, rtr)