July 25, 2021

Inflation in Germany: rate rises to 2.5 percent – highest value since 2011

economy Federal Office of Statistics

Inflation rate rises to 2.5 percent in May – the highest value since 2011

Gasoline cost 27.5 percent more in May than a year earlier

Gasoline cost 27.5 percent more in May than a year earlier

Source: dpa-infocom GmbH

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The inflation rate in Germany is higher than it has been in almost ten years. The main drivers are fuels and heating oil, which are 27.5 and 35.4 percent more expensive than a year ago.

SIn May, rising costs for energy products such as gasoline pushed the German inflation rate to its highest level in nearly ten years. Goods and services rose by an average of 2.5 percent compared to the same month last year, as the Federal Statistical Office confirmed an earlier estimate on Tuesday. “This increased the inflation rate for the fifth month in a row,” it said. “The last time it reached this level was almost ten years ago in September 2011.” In April the rate was 2.0 percent, in March 1.7 percent.

Once again, energy stood out as the price driver, which increased in price by ten percent. Fuels such as gasoline cost 27.5 percent more than a year earlier, and heating oil 35.4 percent more. This is mainly due to the fact that oil prices had slipped into the basement a year earlier due to the Corona recession. The world economy is now growing vigorously again.

In addition, climate-damaging fossil fuels have been producing 25 euros per tonne of CO since the beginning of the year2 occupied, which also makes them more expensive. Food cost 1.5 percent more in May than a year earlier, services 2.2 percent more and housing rents 1.4 percent more.

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According to experts, prices should rise even more significantly in the second half of the year. “In some months, the annual rate of inflation could even climb up to four percent,” says an analysis by economists at Deutsche Bank led by chief economist Stefan Schneider. One reason for this is that prices were depressed by the temporarily reduced VAT in the second half of 2020 and this effect is now being reversed.

However, most experts expect the price pressure to ease again in the coming year. “From today’s perspective, a sustained increase in the inflation rate is not to be expected, because there are currently no signs of a wage-price spiral that could lead to permanently high inflation,” says the current monthly report of the Federal Ministry of Economics. Such a spiral comes into play when unions enforce massive wage increases because of higher prices, which in turn could add companies to their sales prices.