National economy German inflation continues to rise
Life in Germany became even more expensive in November. At 2.2 percent, the annual inflation rate exceeded the two percent mark for the first time since July.
28.11.2024, 15:04
SDA
This was announced by the Federal Statistical Office on Thursday based on preliminary data. Food and services remain the price drivers. Meanwhile, consumer prices fell by 0.2 percent from October to November.
According to economists, the upward trend in the annual inflation rate will continue in the coming months. The good news for consumers is that inflation is nevertheless likely to remain at a comparatively moderate level.
Upward trend - but no wave of inflation
None of the experts are currently expecting a wave of inflation like in 2022. At that time, energy prices soared as a result of the Russian attack on Ukraine, causing the inflation rate in Germany to climb to almost 9%.
Inflation in Germany is currently a long way from such levels, even if the trend has reversed: In September, the annual inflation rate in Europe's largest economy had reached its lowest level since February 2021 at 1.6 percent. One month later, above-average price increases for services and food pushed the rate up to 2.0%.
Food and services as price drivers
Prices for food and services continued to drive inflation in November 2024. People had to pay 1.8% more for food than a year earlier. The upward price trend thus slowed somewhat.
One important ingredient for all cookie bakers during the Advent season became more expensive than average: butter cost over 40 percent more than a year earlier in some cases, as reported by state statistical offices. Services such as restaurant visits, package tours and car repairs increased in price by 4.0% in November, as in the previous month.
Energy cheaper
Fuel and heating were cheaper than a year earlier: overall, energy was 3.7% cheaper than in November 2023. In October, however, prices for these products were 5.5% lower than in the same month last year, compared to 7.6% in September. The price trend for energy therefore had less of a dampening effect on the inflation rate than in previous months.
Excluding the volatile prices for energy and food, German statisticians calculated an inflation rate of 3.0% for November. This core inflation rate reflects the underlying inflation rate and, in the opinion of many economists, represents the inflation trend better than the overall rate.
Temporarily higher inflation rates
According to the Bundesbank, people in Germany will have to adjust to slightly higher inflation rates temporarily into the new year. In 2023, both energy prices and travel prices had fallen significantly by the end of the year - these dampening base effects will now no longer apply.
"At the start of the new year, special effects are also pushing up prices," explains the Bundesbank in its latest monthly report. These include the price increase for the Deutschlandticket and probably also substantial increases in private health insurance rates.
In addition, the significant wage growth from 2024 will keep inflation in services high. Higher inflation rates reduce consumers' purchasing power because they can then afford less for one euro.
How is the ECB reacting?
Although inflation rates in the eurozone have recently picked up again somewhat, many economists believe that the European Central Bank (ECB) is likely to cut key interest rates in the eurozone further in mid-December - and in the months thereafter.
Lower interest rates help the weakening economy: companies and private individuals tend to be able to obtain fresh money more cheaply in order to invest and consume. The ECB's main objective is stable prices and therefore a stable currency in the eurozone. The central bank believes this will be achieved when inflation reaches 2.0 percent in the medium term.
