Inflation in Germany has slowed somewhat for the second month in a row. At 7.2 percent, annual inflation remained at a comparatively high level in April, according to initial calculations by the Federal Statistical Office. According to the Wiesbaden authorities on Friday, consumer prices rose by 0.4 percent from March to April of the current year.
In March, the annual inflation rate in Germany, at 7.4 percent, fell below the eight percent mark for the first time since August 2022. High inflation is a challenge for consumers: it saps their purchasing power, people can afford less for one euro.
Food prices increased by 17.2 percent
Based on a recent survey, the consulting firm Simon-Kucher found that people were “continuing to put the brakes on costs”. According to this, almost half of the 1,300 people surveyed in Germany want to shop less frequently (44 percent) or less (45 percent) in the next twelve months.
According to preliminary calculations by statisticians, food prices rose by 17.2 percent in April within a year. This is the first time this year that inflation in this area has weakened: in January 2023, food prices in Germany were 20.2 percent higher than in the same month last year, in February it was 21.8 percent and in March it was 22.3 percent .
The credit insurer Allianz Trade does not just attribute the increase in food prices to higher raw material costs and higher energy prices. Andy Jobst from Allianz Trade recently told the German Press Agency that “excessive profit-taking” by companies is making a noticeable contribution. According to this analysis, food prices across Europe in the first quarter were almost 15 percent above the previous year’s level, in Germany by around 22 percent.
“The wave of price increases should have already passed its apex”
On the other hand, according to official figures, the rise in energy prices picked up again in April. According to calculations by the Federal Office, the price of energy rose by 6.8 percent compared to the same month last year, after growth of 3.5 percent in March and plus 19.1 percent in February. The federal government is trying to make natural gas, electricity and district heating more affordable by applying price brakes retroactive to January 1st.
According to a survey by the Ifo Institute, fewer companies are planning price increases in the next three months than recently. “The wave of price increases should have already passed its apex,” analyzed Ifo economic chief Timo Wollmershäuser. The focus of the price increases remained on retail and consumer-related services such as restaurants and hairdressers. “Therefore, inflation should only drop very slowly in the coming months,” predicted Wollmershäuser.
The European Central Bank (ECB) is trying to dampen inflation with higher interest rates. Because higher interest rates make loans more expensive, which can slow down demand. The central bank is aiming for stable prices overall for the euro area with an inflation rate of two percent. After six interest rate increases in a row, the key interest rate in the euro area is 3.5 percent. Another hike is expected at the next ECB meeting on May 4th.
