Recovering Inflation Rate
Inflation Stays Steady as Energy Prices Fall
Germany's inflation rate remained unchanged in May at 2.1%, according to the Federal Statistical Office. This indicates that consumer prices, on average, increased by 2.1% compared to the same month last year. In April, the inflation rate also stood at 2.1%.
Between April and May, prices for goods and services rose slightly by 0.1%, however, energy prices saw a significant decrease. Energy costs were 4.6% lower than a year ago, marking a drop from -5.4% in April. The decrease is primarily attributed to a decrease in global oil prices, due in part to the trade war initiated by US President Donald Trump, according to economists.
While food prices continued to rise, they increased at a slower pace than in previous months. For example, non-alcoholic beverages became 8.9% more expensive, and fruit increased by 8.6%. Services costs rose by 3.4%, while goods became 0.9% more expensive. The inflation rate excluding food and energy, or the core inflation, fell to 2.8%.
The European Central Bank (ECB) aims for inflation of "below, but close to, 2%" over the long term. The current German inflation rate, calculated according to European standards, is slightly above this target at 2.1%. Despite falling energy prices, persistent increases in food and services prices are keeping inflationary pressures above the ECB's ideal range for core measures.
Commerzbank's chief economist, Jörg Krämer, noted that excluding volatile food and energy prices, the inflation rate is still significantly above the ECB's target of 2%. While the prices for services are no longer rising as rapidly, the prices for goods have recently increased again.
InflationGermanyECBEnergy PricesFood Prices
Enrichment DataRecent declines in wholesale energy markets, particularly for natural gas, motor fuels, and heating oil, led to year-on-year drops in both producer and consumer energy prices. Food prices continue to rise, though at a slower pace than in previous months. Core inflation, which excludes energy and food, has also risen, indicating underlying price pressures remain resilient, especially in the services sector.
The current German inflation rate, calculated according to European standards, is slightly above the ECB's ideal range for core measures at 2.1%, largely due to persistent increases in food and services prices, while energy prices are experiencing a drop.
Recent declines in wholesale energy markets, particularly for natural gas, motor fuels, and heating oil, led to year-on-year drops in both producer and consumer energy prices, which could potentially influence the ECB's future monetary policy decisions.
