Inflation continues to fall in Germany

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High inflation is a burden for consumers in Germany. Now there is another small glimmer of hope.

Inflation in Germany slowed slightly for the second month in a row. Annual inflation remained relatively high in April, at 7.2 percent, according to preliminary calculations by the Federal Statistics Office. Consumer prices rose 0.4 percent from March to April this year, according to Wiesbaden officials on Friday.

In March, the annual inflation rate in Germany fell to 7.4 percent, falling below eight percent for the first time since August 2022. High inflation is a challenge for consumers: it reduces their purchasing power, people can afford less for one euro.

Food is getting more and more expensive

Consulting firm Simon-Kucher found that people “continue to curb costs” based on a recent survey. Accordingly, almost half of the 1,300 people surveyed in Germany would like to shop less (44 percent) or less (45 percent) in the next twelve months.

According to preliminary calculations of statisticians, food prices increased by 17.2 percent in a year in April. Inflation in this area weakened for the first time this year: In January 2023, food prices in Germany increased by 20.2 percent compared to the same month of the previous year, reached 21.8 percent in February and 22.3 percent in March.

“Taking Excessive Profits”

Credit insurer Allianz Trade isn’t just tying the rise in food prices to higher raw material costs and higher energy prices. Andy Jobst of Allianz Trade recently told the German Press Agency that “excessive profits” by companies make a noticeable contribution. According to this analysis, food prices in Europe increased by about 15 percent in the first quarter compared to the previous year, and by about 22 percent in Germany.

On the other hand, according to official figures, the increase in energy prices accelerated again in April. According to the calculations of the Federal Office, the energy price increased by 6.8 percent compared to the same month last year, after increasing 3.5 percent in March and 19.1 percent in February. The federal government is trying to make natural gas, electricity and central heating more affordable by applying retroactive price brakes from January 1.

The European Central Bank tries to reduce inflation

Fewer companies are planning price increases in the next three months than recently, according to a survey by the Ifo Institute. “The wave of price increases should have passed its peak long ago,” analyzed Ifo chief economics Timo Wollmershäuser. The focus of price increases remained on retail and consumer-related services such as restaurants and hairdressers. “Therefore, inflation should only fall very slowly in the coming months,” Wollmershäuser predicted.

The European Central Bank (ECB) is trying to reduce inflation with high interest rates. That’s because higher interest rates make loans more expensive, which can slow demand. The central bank is targeting generally stable prices for the eurozone, with an inflation rate of two percent. After six consecutive rate hikes, the key rate in the euro area is 3.5 percent. Another hike is expected at the next ECB meeting on May 4.

Source :Blick