The price pressure on consumers in Germany easily subsided in March.
At the same time, however, food has become more expensive, as can be seen from preliminary calculations by the Federal Statistical Office, which were published on Monday. The general inflation rate fell by 0.1 points to 2.2 percent in March. Analysts expected this on average. At the beginning of the year, inflation in Germany had been dilated after three climbs in a row. In December, the inflation rate was still 2.6 percent.
In the case of the harmonized consumer prices (HVPI) for European comparison purposes, the inflation also decreased in March. Here the annual rate dropped to 2.3 percent, previously 2.6 percent in February. The decline was slightly stronger than expected. In the month comparison, the Federal Office for March reported an increase in consumer prices by 0.3 percent.
“While energy prices reduce the overall inflation, there are relatively high price increases in March for services and food,” said Michael Heise, chief economist at the asset manager HQ Trust. In March, consumers for food had to pay 2.9 percent more than a year earlier. As early as February, food prices rose significantly by 2.4 percent within a year.
In contrast, refueling and heating were cheaper than a year earlier in March: energy was reduced by 2.8 percent. In the three months earlier, energy prices were 1.6 percent below the previous year’s level. In view of the changeable international situation, consumers should not rely on this, warns KfW expert Stephanie Schoenwald.
Prize driver services
The price pressure remains high for services that include visits to the restaurant and car repairs. For March, the statisticians determined a price increase of 3.4 percent for the same month last year. In February it was 3.8 percent and 4.0 percent in January. “The decline in inflation is primarily due to the fact that the prices for services no longer rise so quickly,” said Commerzbank chief economist Jörg Krämer. “The weak economy makes it difficult for companies to pass on the rising wages to consumers.”
According to the Bundesbank, the inflation of services slowly decreases. Union and SPD want to provide further relief: In their explorations, they have agreed for a future federal government that VAT for food in restaurants and restaurants should be permanently reduced from 19 to 7 percent, “to relieve gastronomy and consumers”. It is quite unclear whether the industry will pass on the tax benefits to customers.
Billion-dollar debt package as an inflation driver?
Many economists expect the inflation rate to decline further over the course of the year – if not quite as quickly as hoped for at first. According to the IFO Institute, the inflation rate should remain over the two percent mark in the coming months.
The Union and SPD’s billion-dollar finance package could fuel inflation, some economists fear. Without reforms, there is “the risk that the additional debts generate an inflation pressure, as a result the interest rates and the hoped -for growth impulses,” warned the employer -based institute of the German economy (IW) recently. Higher inflation rates reduce people’s purchasing power because they can then afford less for one euro.
The inflation of inflation in Europe’s largest economy gives the European Central Bank (ECB) freedom that will decide on the key interest on April 17. In view of a declining inflation, the ECB has reduced interest rates six times since June 2024. The deposit rate relevant to banks and savers is currently 2.50 percent. Whether the series of falling interest continues is mainly uncertain because of the economic risks from customs conflicts with the United States.
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Wiesbaden (dpa-Afx)