NAccording to an initial estimate by the Federal Statistical Office (Destatis), inflation in Germany fell to 7.6 percent in June. The Wiesbaden statisticians had determined an inflation rate of 7.9 percent for May.
Goods prices rose by 14.0 percent in June compared to the same month last year. Consumers had to pay 38.0 percent more for energy. The rate of inflation was somewhat lower than in May, when energy prices rose by 38.3 percent. The reduction in fuel tax is likely to have had an impact on this. Food prices increased by 12.7 percent. Only 2.1 percent higher prices were charged for services. A slight trend reversal has been observed here since May. While the price increase for services was 3.2 percent in April, it fell to 2.9 percent in May. It is a small relief for consumers that June did not bring any further losses in purchasing power compared to the previous month,” commented Michael Heise, chief economist at HQ Trust, on the development. However, Heise continued, it is more a matter of breathing space and not a turning point in inflation. “The peak of inflation is more likely to be reached in September.”
The statistical offices of the federal states clarify which goods and services have become more expensive. The states of Bavaria, Baden-Württemberg, Hesse, Saxony, Berlin and Brandenburg reported inflation rates of between 7.1 and 8.6 percent for June. In Bavaria, the prices for household energy including electricity and gas rose by 42.8 percent year-on-year. Heating oil, which is also part of household energy, was 102.7 percent more than twice as expensive as in June 2021. Gasoline and other car fuels were 33.8 percent more expensive, the Bavarian State Statistical Office in Fürth announced on Wednesday.
Among the food items, products whose prices were influenced by the Russian war of aggression in Ukraine were badly affected. In Berlin, for example, flour and other grain products rose by 46.5 percent. Wheat flour in particular even 70.5 percent. For sunflower, rapeseed oil and similar products, inflation in Berlin was 154.5 percent. Ukraine is an important supplier for both wheat and oilseeds, which is currently largely absent due to the war. In Brandenburg, consumers paid 48.3 percent more for butter than in the same month last year, as the Berlin-Brandenburg Statistics Office announced on Wednesday. Meat and meat products rose by 21.2 percent in Brandenburg.
relief measures take effect
According to the Hessian State Statistical Office, the limited introduction of the 9-euro ticket had a price-lowering effect in the services sector. Association tickets in Hesse were on average 61.3 percent cheaper in June than a year earlier and 62.1 percent cheaper than in May 2022. Prices for rail journeys in local transport fell by an average of 38.2 percent compared to the previous month and cost 37.2 percent less than in the same month of the previous year.
“You shouldn’t let dust be thrown in your eyes,” said Dekabank chief economist Ulrich Kater of the Reuters news agency in view of the looming decline in inflation in the month that was coming to an end. “It’s the fiscal relief measures in particular that have brought inflation down a bit.” “But that doesn’t get past the fact that we will measure inflation rates of over seven percent in Germany by the end of the year,” said Kater. Commerzbank chief economist Jörg Krämer expects inflation to rise again as early as September as soon as the relief measures expire. “This is all the more true as German companies are still a long way from passing on the massive increase in material costs to consumers,” warned Krämer. It should only go down from January 2023 if new crises do not break out, said Ulrich Kater.
The European Central Bank (ECB) now intends to take more courageous action against persistently high inflation. After the programs to purchase government bonds are due to end, the ECB Council intends to decide on an interest rate hike of at least 25 basis points at its meeting in July. However, some Council members, including Gediminas Simkus and Martins Kazaks, do not want to reject a 50 basis point interest rate hike, should economic and inflation data from the euro countries provide a suitable basis. This would end the phase of negative interest rates in Europe in one fell swoop. The interest rate for the ECB’s deposit facility is currently minus 0.5 percent and has been negative since 2014.
