The temporary relaxation for Germany’s consumers has fizzled out: the inflation rate is again scratching the 8 percent mark. After two months of declines, it jumped to 7.9 percent in August. Economists give people little hope: They expect double-digit inflation rates in Europe’s largest economy in the coming months. The Bundeskartellamt assured that it was keeping a close eye on price developments, for example in the food trade and at petrol stations.
Energy and food have been the biggest drivers of inflation for months. The Russian attack on Ukraine and supply bottlenecks have exacerbated the situation. According to provisional calculations by the Federal Statistical Office, heating oil, fuel and electricity cost a total of 35.6 percent more in August than a year earlier. Food also rose above average by 16.6 percent, as the authority announced on Tuesday. Overall consumer prices increased by 0.3 percent from July to August.
Higher inflation rates reduce the purchasing power of consumers because they can then afford less for one euro. Wage increases are more than offset by inflation. The bottom line is that people have less money in their pockets. In the second quarter, real wage losses accelerated to 4.4 percent.
Many people already limit their consumption in order to be able to cope with their daily needs. In a survey commissioned by the BdB banking association, seven out of ten respondents stated that they were holding back on spending because of inflation.
This is slowing down private consumption as an important pillar of the economy. “The fear of significantly higher energy costs in the coming months is forcing many households to take precautions,” explained GfK consumer researcher Rolf Bürkl recently. The consumer climate is continuing its steep descent.
The relief packages from the state had at least briefly eased the situation. After spiking to 7.9 percent in May, annual inflation fell for two months: 7.6 percent in June and 7.5 percent in July.
The fuel discount limited to three months and the 9-euro ticket for local public transport dampened the rise in prices somewhat. However, both measures expire at the end of August. For this reason alone, according to economists, inflation should pick up.
“There are currently hardly any goods that are not becoming more expensive,” said Thomas Gitzel, chief economist at VP Bank.
The Bundesbank also believes it is possible that the inflation rate, as measured by the so-called harmonized index of consumer prices (HICP), will reach 10 percent in autumn. “The increase in the general statutory minimum wage and the devaluation of the euro will provide additional impetus in the next few months,” says the Bundesbank’s latest monthly report. In August, the HICP, which the European Central Bank uses for its monetary policy, was 8.8 percent in Germany. The ECB is aiming for a stable price level with an annual inflation rate of 2 percent for the common currency area.
According to the Bundeskartellamt, it is scrutinizing price developments even more closely than usual. “We get a lot of complaints about price increases,” said the President of the competition authority, Andreas Mundt. In the food trade, the authority has therefore already asked the industry for information about the background to price increases. “We’re following this with eagle eyes,” said Mundt. According to Mundt, the Cartel Office is also paying particular attention to the oil companies – not least with a view to the impending expiry of the tank discount.
Inflation rates at the current level have never existed in reunified Germany. In the old federal states you have to go back in the time series to the winter of 1973/1974 during the oil crisis to find similarly high values.
Inflation is putting the ECB under pressure to counteract this with higher interest rates. “Hopefully the ECB will manage to make a big interest rate hike of 0.75 percentage points at its meeting next week,” warned Commerzbank chief economist Joerg Kraemer. The euro currency watchdogs decided in July to raise interest rates for the first time in eleven years. The next ECB meeting is on September 8th. (dpa)