Sluggish price increase pace, yet costs of edibles remain high
Energy Prices in Germany Decline, Food Costs Remain Elevated Amid Stable Inflation Rate
Germany's inflation rate remained steady at 2.1% in May, according to preliminary statistics from the Federal Statistical Office. This level is slightly above the European Central Bank's (ECB) target of 2%.
On a year-over-year basis, the average cost of goods and services increased by 2.1%, consistent with the April figures. Prices grew by a slight 0.1% from April to May.
Energy costs, however, saw a significant decrease. They were 4.6% less expensive than the previous year, down from a 5.4% drop in April. The falling global prices for crude oil, partially attributed to the ongoing trade war orchestrated by U.S. President Donald Trump, is believed to be a key factor contributing to the lowered energy prices.
On the flip side, food prices continued to drive inflation. In May, they increased by 2.8%, mirroring April's growth. In North Rhine-Westphalia, for instance, the cost of non-alcoholic beverages rose by 8.9%, and fruit prices climbed by 8.6%. Service prices, while still costlier, saw a moderating rate of increase at 3.4%, down from 3.9% in April. Goods, on the other hand, became only 0.9% more expensive, as compared to a 0.5% rise in April.
The inflation rate, excluding food and energy—often referred to as core inflation—slipped to 2.8% in May (April: 2.9%).
"May's inflation data, with its marked flaw, demonstrate that, without the volatile energy and food prices, the inflation rate would still be a striking 2.8%, exceeding the ECB's target of 2%," noted Jörg Krämer, the chief economist of Commerzbank. "Although service prices are no longer experiencing such a rapid increase, consumer goods prices have started to spike again. Inflation persists."
Germany's unique 2021 economic landscape featured a slowdown in inflation for energy, as a result of market stabilization, temporary government subsidies, and base effects. Concurrently, food prices saw a persistent increase due to rising production and transportation costs, supply chain disruptions, and strong consumer demand for groceries in the pandemic-stricken economy.
- In light of the stable inflation rate, it might be an opportune time for companies to reconsider their employment policies within the community, as the decline in energy prices could potentially impact their finance-related decisions.
- As food prices remain elevated amid a stable inflation rate, it's essential for businesses to seriously contemplate their employment policies to ensure the financial well-being of their employees, as they grapple with rising costs in their daily lives.
