The stubbornly high inflation is becoming a test of patience for Germany’s consumers: despite another decline, prices in Germany also rose significantly in August. At 6.1 percent, the general inflation rate was only slightly lower than in July at 6.2 percent, as calculated by the Federal Statistical Office. On Friday, the Wiesbaden authority confirmed its inflation estimate published at the end of August.
After all: After an interim increase to 6.4 percent in June of the current year, the annual inflation rate has now been declining for two months in a row. However, the rate was already at 6.1 percent in May 2023. From July to August of the current year, consumer prices increased by a total of 0.3 percent – the Federal Office also confirmed its estimate here.
“The inflation rate remains at a high level,” said the President of the Federal Statistical Office, Ruth Brand. “Price increases for food and energy are above overall inflation and are keeping the inflation rate high.”
The biggest price driver recently was food, which was 9.0 percent more expensive in August than a year earlier. Consumers had to pay noticeably more, especially for sugar, jam, honey and confectionery (plus 17.1 percent). Bread and grain products (plus 13.6 percent) and vegetables (plus 12.4 percent) also became noticeably more expensive within a year. Cooking fats and oils, on the other hand, were 13.9 percent cheaper than a year before.
People had to pay 8.3 percent more for energy in August of the current year than in the same month last year. Electricity in particular was significantly more expensive at 16.6 percent than a year before. The inflation rate excluding the volatile prices of energy and food was 5.5 percent in August as in July 2023.
High inflation is causing problems for consumers; people can afford less for their money. This slows down private consumption, which is an important pillar of the German economy. After all, the inflation rate is now a long way from its highest level since German reunification at 8.8 percent in autumn 2022.
Many economists expect inflation rates to continue falling in the coming months because the effect of the 9 euro ticket and the fuel discount will then no longer apply compared to the previous year. In the summer of 2022, the 9-euro ticket, which was limited to three months, and the fuel discount temporarily slowed the rise in consumer prices.
However, the dampening effect of the 9 euro ticket in the previous year means that in the current year, for example, local train tickets in August 2023 were 64.6 percent more expensive than a year before, despite the introduction of the Germany ticket.
Overall, according to economists, it will take a while before inflation returns to a level at which the European Central Bank (ECB) sees its goal of stable prices achieved: 2.0 percent in the euro area in the medium term. In August, the so-called harmonized consumer price index, which the ECB uses for its monetary policy, was 6.4 percent in Europe’s largest economy, Germany.
The ECB is trying to dampen inflation with a series of nine interest rate increases in a row since July 2022. Higher interest rates make loans more expensive, which can slow down demand. The key interest rate in the euro area is now 4.25 percent. Next Thursday (September 14th) the Governing Council will decide what to do next.
