Inflation in Germany is still well above the seven percent mark. For the second month in a row, however, the upward trend in prices has lost some of its pace. The Ifo Institute assumes that inflation is likely to have peaked.?
After the introduction of the fuel discount and 9-euro ticket, the inflation dynamic in Germany weakened somewhat for the second month in a row. According to an initial estimate by the Federal Statistical Office, consumer prices rose by 7.5 percent in July compared to the same month last year. In June the annual inflation rate was 7.6 percent and in May it was 7.9 percent.
Based on a company survey, the Ifo Institute assumes that inflation is likely to have peaked. “Prices are likely to continue to rise, but the pace will slow down,” said Ifo economic chief Timo Wollmershäuser. “Companies’ price expectations are usually reflected in consumer prices with a few months lag,” he said. It can therefore be assumed that inflation has peaked and will “reduce gradually over the course of the second half of the year”.
LBBW economist Jens-Oliver Niklasch is not so sure: “I would not go so far that we have reached the high point.” For example, it is still completely unclear how energy costs will develop for consumers. In connection with the Ukraine war, the prices for energy, raw materials and food have risen sharply in some cases.
In July, energy prices rose by 35.7 percent compared to the same month last year. Food cost 14.8 percent more than a year earlier, as the Wiesbaden authority announced. Higher inflation rates reduce the purchasing power of consumers because they can afford less for one euro. That’s social explosives. According to studies, high inflation rates hit low-income households disproportionately hard.
The federal government is trying to relieve people, among other things, with the tank discount introduced at the beginning of June and the 9-euro ticket. In addition, since July 1, electricity customers no longer have to pay for the promotion of green electricity via their electricity bill. Further relief measures are currently being discussed. According to preliminary data, consumer prices rose 0.9 percent month-on-month in July. According to economists, people cannot hope for a sustained decline in inflation for the time being, also because the 9-euro ticket and fuel discount are limited to the end of August.
“The inflation rate is likely to remain high in the coming months. It could even rise again in September because the temporary relief measures will then no longer apply,” wrote the Deutsche Bundesbank in its recently published monthly report. Inflation rates at the current level have never existed in reunified Germany. In the old federal states there were similarly high values ??in the winter of 1973/1974. At that time, oil prices rose sharply as a result of the first oil crisis.
