– by René Wagner
Berlin (Reuters) – The high level of inflation in Germany surprisingly weakened in November due to falling prices for petrol, diesel and heating oil.
Consumer prices rose by an average of 10.0 percent compared to the same month last year, as the Federal Statistical Office announced on Tuesday. In October, the inflation rate was 10.4 percent, its highest level since 1951. It’s the first drop since July. Economists surveyed by the Reuters news agency had expected the figure to remain unchanged for the month that was coming to an end. Prices even fell from October to November, by 0.5 percent.
“A silver lining on the horizon,” commented the chief economist at Berenberg Bank, Holger Schmieding, on the decline. “With luck, we’ll have the inflation peak behind us.” The chief economist at Hauck Aufhäuser Lampe Privatbank, Alexander Krüger, also sees it this way: “It could be the starting signal for a further decrease in inflationary pressure. By the turn of the year, the inflation rate will probably already be in the single digits.” In federal states such as Saxony, Hesse and Baden-Württemberg, the value is already below the ten percent mark.
Energy prices rose particularly sharply again as a result of the Russian war against Ukraine: it cost an average of 38.4 percent more than in November 2021, after it had even risen by 43.0 percent in October. Food prices, on the other hand, rose more sharply than recently, by 21.0 percent. 3.7 percent more was charged for services and 1.9 percent more for residential rents.
“YET TOO EARLY FOR ENTHUSIASM”
However, experts are not yet giving the all-clear, despite falling inflation. “We are approaching the summit, but it is still too early for a storm of enthusiasm,” said ING chief economist Carsten Brzeski. There is still a lot of inflationary pressure. “From January, many consumers will have to pay more for electricity,” Schmieding pointed out. “That could push the inflation rate up again.”
After that, however, the price pressure should decrease considerably. In the expected winter recession, companies would have little chance of passing on higher costs to their customers. So-called base effects will be added from March. “Then we will no longer compare the current prices for energy and food with the lower pre-war prices, but with the high prices since the beginning of the war,” said Schmieding. In the spring of 2024, the inflation rate could even fall to around two percent. The survey by the Ifo Institute also shows that it is still too early to give the all-clear: According to this, almost every second company in Germany wants to increase its prices in the coming months.
Easing inflation in Europe’s larger economy is taking some of the pressure off the European Central Bank (ECB) to continue raising interest rates by very large increments in the coming year. It will next decide on its monetary policy on December 15. “An interest rate hike of ‘only’ 50 basis points in December could become socially acceptable,” said VP Bank’s chief economist, Thomas Gitzel. Since July, the ECB has raised key interest rates three times in rapid succession by a total of 2.0 percentage points. This makes credit more expensive, which can curb investment and consumption and thus dampen price pressure. At the same time, the ECB is also risking that the economy, which is battered by high energy prices, will slip into recession. The monetary watchdogs are aiming for two percent inflation as the optimum value.
(edited by Christian Rüttger.; If you have any questions, please contact our editorial team at [email protected])