Status: 29.06.2021 3:27 p.m.
The inflation rate fell slightly in June, although the level remained high. It is also too early to give the all-clear, as economists temporarily expect prices to rise even more sharply in the second half of the year.
The inflation rate in Germany slowed somewhat in June. According to preliminary data, consumer prices were 2.3 percent above the level of the same month last year, according to the Federal Statistical Office. Compared to May 2021, the increase is 0.4 percent. In the previous month, inflation had climbed to 2.5 percent, the highest level since September 2011.
The current data are in line with expectations: Economists surveyed by the Reuters news agency had expected a decline to 2.3 percent for June.
Energy prices fuel inflation
Inflation continues to be fueled primarily by the rise in energy prices, which rose by 9.4 percent compared to June 2020. The background to this is the global economic recovery, which is increasing the demand for crude oil and thus driving the price up.
In addition, since the beginning of 2021, a tax of 25 euros per tonne of carbon dioxide (CO2) emitted has been due in Germany, which is produced when diesel, petrol, heating oil and natural gas are burned. The prices for food rose by 1.2 percent compared to the previous year, rents rose by 1.3 percent.
Slightly above the target zone
However, experts assume that inflation will rise again in the coming months and reach three or four percent in the second half of the year. Among other things, this has to do with the fact that prices were depressed by the temporarily reduced VAT in the second half of 2020 and this effect is then reversed.
“It is only a short respite in the rise to the inflation summit,” said LBBW economist Jens-Oliver Niklasch. “Starting next month, the effect of the VAT increase will have a full impact on the calculation of inflation.”
DZ Bank chief economist Michael Holstein sees it similarly: “The three percent mark could be cracked as early as July.” The financial markets are keeping a very close eye on the rise in inflation in many regions. The European Central Bank (ECB) sees a price increase of just under two percent as ideal for the economy in the euro area in the medium term.
Weidmann wants to dampen worries
Bundesbank President Jens Weidmann recently tried to dampen fears that inflation would overshoot in the medium term. He takes the worries seriously, but the dangers of inflation should not be exaggerated in the discussion, says the economist.
The Bundesbank believes that inflation rates of four percent are temporarily possible – as measured by the harmonized consumer price index HICP, which the European Central Bank (ECB) uses for its monetary policy. But Weidmann puts it down: “For a stubbornly excessive inflation rate, second-round effects would be decisive, in the form of significantly stronger wage growth or noticeably higher inflation expectations. However, this is currently not in evidence.”
That is why the economists at the Bundesbank expected inflation rates below two percent in Germany again for the next few years.