(New: Statements by Robert Habeck)
WIESBADEN (dpa-AFX) – People in Germany are still feeling the effects of inflation despite a slowdown in March. According to preliminary data from the Federal Statistical Office on Thursday, consumer prices rose by 7.4 percent in March compared to the same month last year. In February, 8.7 percent were measured. For the first time since August, the inflation rate fell below the 8 percent mark in March. However, economists see little reason to be happy. The development does not mean any relief for consumers.
The prices are compared with the level of the same month of the previous year. In March last year, consumer prices rose by 5.9 percent.
Higher inflation rates reduce the purchasing power of consumers because they can then afford less for one euro. Economists initially give little hope: “Despite today’s decline, it cannot be assumed that the inflation problem will soon be off the table,” said Deutsche Bank economist Sebastian Becker.
According to economists, the main reason for the weakening in March was energy prices. After the Russian attack on Ukraine around a year ago, oil and gas prices skyrocketed – by around 15 percent in March 2022 alone. “When calculating the current inflation rate, the basis for the previous year is significantly higher,” explained Jörg Zeuner, chief economist at fund provider Union Investment. According to preliminary data, energy prices rose by 3.5 percent in March of this year compared to the same month last year. The government price brakes for gas and electricity, which have been in effect since March 1, 2023, should also have a dampening effect.
Food prices rose above average by 22.3 percent. For a long time, inflation was mainly driven by energy and food prices. In the meantime, price increases are affecting more and more parts of everyday life. Therefore, there is no joy about the decline in inflation, said VP Bank chief economist Thomas Gitzel: “Price inflation has recently hit the service sector in particular.” According to his Commerzbank colleague Jörg Krämer (Commerzbank), “with the foreseeable sharp rise in wages, a new wave of costs is likely to hit the economy”.
Compared to the previous month, consumer prices increased by 0.8 percent overall in March.
According to economists, inflation in Germany may have peaked. However, they do not expect a thoroughgoing relaxation this year. The federal government assumes an annual average inflation rate of 6 percent. According to revised data from the Federal Office, consumer prices in Europe’s largest economy rose by an average of 6.9 percent last year.
Federal Economics Minister Robert Habeck said in Berlin on Thursday that he would not speak of a trend reversal from February to March. “We’ve seen before that inflation is going down.” Inflation peaked earlier. “But the decline is strong and we can continue that by pursuing smart policies.” It also helps to save energy. In addition, it is about additional capacities and the expansion of renewable energies, said the Green politician.
Bundesbank boss Joachim Nagel, who sits on the monetary policy council of the European Central Bank (ECB), recently emphasized: “Our fight against inflation is not over yet.” In March, monetary authorities raised interest rates in the euro area for the sixth time in a row. Rising interest rates can counteract high inflation rates because loans become more expensive and this slows down demand.
The ECB is aiming for price stability in the euro area in the medium term with an inflation rate of 2 percent. This target has been a long way off for months. According to the latest data, the inflation rate in the common currency area was 8.5 percent in February – after 8.6 percent in January. In Germany, the comparable index that the ECB used for its monetary policy in March compared to the previous year at 7.8 percent./mar/DP/jsl