The year 2023 will burden Germany’s consumers with the second highest inflation rate since reunification. On average for the year, consumer prices rose by 5.9 percent, as the Federal Statistical Office calculated based on preliminary data. After 6.9 percent inflation in 2022, this was the second highest value in reunified Germany, as the Wiesbaden authorities announced on Thursday.
In December, inflation rose again to 3.7 percent after five months of declines. In November, the lowest level since June 2021 was reached at 3.2 percent. Economists had expected the trend to reverse in December: a year earlier, the state had covered the one-time cost of the discount for gas and district heating customers that month. This price-dampening effect is not included in the calculation for December 2023. According to preliminary figures, consumer prices rose by 0.1 percent from November to December 2023.
Looking ahead, however, various forecasts assume that inflation in Europe’s largest economy will continue to fall. For example, the Council of Experts for the Assessment of Overall Economic Development (“Economy”) assumes an average inflation rate of 2.6 percent in 2024. The Ifo Institute expects an average of 2.2 percent this year.
After the Russian attack on Ukraine in February 2022, energy and food prices in particular rose sharply. The inflation rate in Germany climbed to 8.8 percent in autumn 2022, which was the highest level since reunification. Recently the inflation rate has weakened. According to the Federal Statistical Office, many energy products in particular were cheaper in October and November 2023 than a year before. Annual inflation for food also continued to weaken, but remained well above overall inflation.
Higher inflation rates reduce the purchasing power of consumers, who can afford one euro less. People’s financial scope is shrinking and income growth is being eaten up by inflation.
The highest inflation rate in a full year to date was 7.6 percent in what was then the Federal Republic of Germany in 1951. However, the calculation method has changed over time. In 2021, consumer prices in Europe’s largest economy rose by an average of 3.1 percent. (dpa)