Federal Statistical Office: inflation concerns are growing – inflation rate over 5 percent

Federal Office of Statistics
Inflation worries grow – inflation rate over 5 percent

The people in Germany have to cope with another price surge: In November inflation rose to its highest level in almost 30 years.

Fueled in particular by increased energy prices, consumer prices rose by 5.2 percent compared to the same month last year. The Federal Statistical Office confirmed a first estimate on Friday. A higher rate of inflation was last measured in the course of the reunification boom in June 1992 at 5.8 percent. In October of the current year the rate was 4.5 percent. In the United States, the inflation rate even rose to 6.8 percent in November.

Higher inflation weakens the purchasing power of consumers because they can then buy less for one euro than before. According to a study by the Institut der Deutschen Wirtschaft (IW), the long-term consequences will primarily affect poorer and older people. Accordingly, the cost of living of the lowest-income households has risen by almost 34 percent since 1995 and that of the highest-income households by around 28 percent. Poor households “spend a large part of their income on essential goods. If the price rises there, there are hardly any alternatives, ”explained study author Markus Demary.

Elderly people are also affected. According to the calculations, an 80-year-old with average consumer behavior pays almost 43 percent more for his standard of living today than someone of his age in 1995. For 18 to 24-year-olds it is around 19 percent more. One reason: Younger people often live in smaller apartments or shared flats, so they spend less on rent and ancillary costs. The «Tagesspiegel» had previously reported on it.

The price of heating oil doubled

In November, people in Germany had to dig deep into their pockets for energy again. Household energy increased in price by a total of 22.1 percent within one year. The price of heating oil doubled. Fuel costs 43.2 percent more than in November 2020. Natural gas (plus 9.6 percent) and electricity (plus 3.1 percent) have also become more expensive. People had to pay 4.5 percent more for food.

Without taking energy prices into account, the inflation rate in November would have been 3.4 percent. Inflation has been fueled for months by rising energy prices in the wake of the global economic recovery after the 2020 Corona crisis. In addition, the withdrawal of the temporary VAT cut is having an impact: the regular rates have been in effect again since January 2021, so goods and services are tending to become more expensive. In addition, there are material shortages and delivery bottlenecks as well as the introduction of the CO2 tax at the beginning of the year.

Price drop for package tours

Compared to October, consumer prices fell by 0.2 percent in November. According to the information, a major reason for this was the seasonal price decline for package tours.

The 6.8 percent recorded in the USA is the highest inflation rate there since 1982. It is now even more significantly above the Fed’s inflation target of two percent. The Federal Reserve has long viewed the increased inflation as a temporary development determined by special corona factors. Federal Reserve Chairman Jerome Powell recently indicated that this view is no longer tenable.

US President Joe Biden tried to calm down. Developments following the collection of the most recent data showed that “the rise in prices and costs is slowing down, if not as quickly as we would like”. Cars and energy costs accounted for half of the price hike in November. Since then, energy prices have fallen significantly.

Inflation is also an important indicator for the monetary policy of the European Central Bank (ECB). The central bank is aiming for an annual inflation rate of 2 percent for the currency area of ​​the 19 countries and is at least temporarily ready to accept a moderate increase or decrease.

The ECB is under pressure from critics to tighten its loose monetary policy in light of rising prices. From the perspective of the central bank, however, the rise in inflation is temporary. The comparatively high inflation rates worried many people, said ECB President Christine Lagarde recently. “But we expect that this rise in inflation will not last. This will calm down again next year. As early as January we expect inflation rates to begin to fall, ”said Lagarde of the“ Frankfurter Allgemeine Sonntagszeitung ”.

The economist Sebastian Dullien sees good chances “that we have reached the peak of inflation with the current rise or that it will be reached in December at the latest”. However, it could take until the second half of 2022 for the inflation rate to drop below the 2 percent mark again. In view of the latest wage agreements, the scientific director of the Institute for Macroeconomics and Business Cycle Research of the trade union Hans Böckler Foundation sees no signs of a dangerous spiral of rising wages and rising consumer prices.

dpa