Anticipated Continuation of Inflation Rate at 2.1%
Germany's Inflation Rate Stays Steady in May
Preliminary data released by the Federal Statistical Office in Wiesbaden indicates that Germany's inflation rate remained unchanged at 2.1% in May compared to the same period last year. Compared to April 2025, consumer prices rose marginally by 0.1%.
Services prices saw a significant increase of 3.4% compared to May 2024, while the inflation rate for food remained consistent at 2.8%. Energy prices showed a slight decrease, falling by 4.6% in May, although the rate of decline was less pronounced than in April (5.4%).
The statistical office forecasted the core inflation rate, excluding food and energy, to be 2.8% in May, a slight decrease from April's rate of 2.9%.
Silke Tobler, an economist at the Institute for Macroeconomics and Economic Research (IMK) of the Hans-Boeckler-Foundation, stated to news agency AFP that the moderate easing of the core rate, excluding energy and food, was as expected. Tobler predicts that the inflation rate will fluctuate around the European Central Bank's (ECB) target of two percent throughout the year.
According to projections, inflation in Germany is projected to drop to 2.4% in 2025 and further decrease to 1.9% in 2026. Economic activity is expected to stagnate in 2025 due to trade tensions and uncertainty, but growth is anticipated to rebound to 1.1% in 2026 as domestic demand strengthens.
Trade tensions, particularly those involving the US, are expected to weigh on exports, but are also contributing to disinflationary pressures due to increased uncertainty and supply chain disruptions. Private consumption is predicted to support the economy, with increases in purchasing power and lower interest rates encouraging spending.
In summary, Germany's inflation rate remained steady in May, influenced by factors such as moderating energy prices, resilient core inflation, and ongoing economic uncertainty. The decline in energy prices and robust private consumption are projected to contribute to a decrease in inflation in the coming years.
The travel industry might benefit from Germany's steadily decreasing inflation rate, as lower costs could lead to more affordable travel options for consumers. Moreover, investors in the finance sector may find opportunities in the German economy, given the forecasted continuous growth and stability in the business and investing landscape.
