From BZ/Reuters
Lower petrol and heating oil prices push inflation in Germany to its lowest level in August 2022. Goods and services cost an average of 7.4 percent more in March than a year earlier, as the Federal Statistical Office announced on Thursday in an initial estimate.
In January and February, inflation was still 8.7 percent. Economists surveyed by the Reuters news agency had expected a decline to 7.3 percent. From February to March, prices rose by 0.8 percent.
Food remained the number one price driver: it rose by an average of 22.3 percent compared to March 2022 and thus more than in February with 21.8 percent. “This is mainly due to the fact that vegetables have apparently become scarce due to crop failures in some supplier countries,” said the chief economist at Berenberg Bank, Holger Schmieding.
Energy cost only 3.5 percent more than a year ago, after 19.1 percent in February. A favorable base effect played a role here. A year ago, after the Russian invasion of Ukraine, energy prices skyrocketed. Now, for the first time, they are being compared to the already elevated prices, not to the lower ones before the outbreak of war – this is known as the base effect. In North Rhine-Westphalia, for example, fuels such as petrol and diesel became cheaper by 19.3 percent, in Bavaria by 17.1 percent.
Most experts now believe that inflation has peaked. “This is not yet the all-clear for the ECB,” said economist Schmieding. The reason for this is the stubbornly high core inflation, which takes into account the strongly fluctuating energy and food prices. This is a sign that inflation is increasingly affecting the economy. In March, for example, package tours in Bavaria were 12.8 percent more expensive than a year ago. “This is mainly due to the people’s desire to travel before Easter,” said Schmieding.
According to ECB Director Isabel Schnabel, core inflation is now proving to be much more resilient than headline inflation. “And of course that causes some headaches for central bankers, too,” she noted. The European Central Bank (ECB) raised its key interest rate from 3.0 to 3.5 percent this month in a bid to curb inflation across the euro zone.