Energy and Food: Inflation rate approaches eight percent mark

Prices in Germany are increasing again. Again, it is the cost of energy that is fueling inflation. Experts expect further increases. The reason is the expiry of the first relief.

The rising prices across the board in Germany are driving inflation close to the eight percent mark. Goods and services were an average of 7.9 percent more expensive in August than a year earlier, according to the Federal Statistical Office. In particular, high energy and food prices provide a boost. Economists had only expected the inflation rate to rise to 7.8 percent.

Inflation had previously eased off for two months in a row – to 7.5 percent in July. The fuel discount and 9-euro ticket acted as a damper. These expire this Wednesday, which should provide a new price boost.

In May, the price of goods and services rose by 7.9 percent, the highest since the early 1970s. Then the fuel discount and 9-euro ticket pushed inflation down to 7.6 percent in June and 7.5 percent in July. After the federal government’s two relief measures expired at the end of August, experts expect inflation rates of around nine percent or even more in the autumn.

The biggest price driver has long been energy. In August, it rose by 35.6 percent, about as much as in July. Food cost 16.6 percent more than in August 2021. Services had to pay 2.2 (July: 2.0) percent more.

The current survey by the Ifo Institute among 9,000 companies also speaks for persistently high price pressure. “Almost every second company wants to increase prices in the next three months,” said Ifo expert Klaus Wohlrabe. “Price increases remain on the agenda.”

For LBBW, the development shows that the “brief phase of slight easing on the price front, which occurred in June and July thanks to government relief measures” is history again. “And this is probably just the overture to a ‘hot autumn of inflation’,” said economist Elmar Völker. Commerzbank economist Jörg Kramer expressed the hope that the European Central Bank would make a major interest rate hike of 0.75 percentage points at its meeting next week.