Another price surge
Is there a permanent threat of higher inflation?
Gasoline prices rose sharply in September. Photo: Carsten Koall / dpa
© dpa-infocom GmbH
Consumers notice it above all when it comes to heating costs and at the petrol station: energy prices are rising sharply. And there are other factors that are fueling inflation in Germany.
Life in Germany is getting more and more expensive. According to data from the Federal Statistical Office, consumer prices rose by 4.1 percent in September compared to the same month last year. Inflation thus exceeded the four percent mark for the first time since December 1993.
What are the consequences of rising inflation rates?
Higher inflation weakens the purchasing power of consumers because they can then buy less for one euro than before. Rising inflation rates are also bitter for savers who, for example, park money in low-interest overnight money accounts. According to calculations by the Commerzbank subsidiary Comdirect, savings deposits lost a total of around 47 billion euros in value in Germany in the first nine months due to low-interest deposits.
Why is inflation rising?
Inflation is currently being fueled by several factors, most notably increased energy prices. “The most obvious is the inflation effect in the energy sector and thus in gas and electricity prices,” explains Jörg Zeuner, chief economist at the Union Investment fund company. “In a few other areas, supply and demand are currently in a similarly large disproportion.” The global economy is recovering comparatively quickly from the Corona shock in 2020. The hunger for energy around the globe is correspondingly great. Strong demand is driving up crude oil and gas prices. In addition, the cold past winter emptied stocks, and since January 25 euros per tonne of carbon dioxide has been due in Germany, which is produced when diesel, gasoline, heating oil and natural gas are burned.
What role do special effects play?
The withdrawal of the temporary VAT cut at the beginning of the year is now having a full impact on inflation. In order to stimulate consumption in the Corona crisis, the federal government had temporarily reduced VAT from July 1, 2020 to December 31, 2020. The regular VAT rates have been in effect again since January 2021, so goods and services are tending to be more expensive compared to the previous year.
What other factors are driving inflation?
Delivery bottlenecks for raw materials and intermediate products, among other things due to congestion at ports and a lack of container capacity, are becoming increasingly noticeable. According to a survey by the Ifo Institute among retailers, customers in the retail sector must expect bottlenecks and higher prices. 74 percent of the retailers surveyed complained of delivery problems in September. “Some Christmas presents may not be available or will be expensive,” said the head of the Ifo surveys, Klaus Wohlrabe.
What was particularly expensive in September?
Consumers had to dig deep into their pockets for energy. “The base effects were essential for this, as we are comparing the current prices with the very low prices of the previous year,” explained the statisticians. Heating oil cost 76.5 percent more than a year earlier, fuel 28.4 percent more. Natural gas (plus 5.7 percent) and electricity (plus 2.0) also became more expensive. Food prices also rose by an above-average 4.9 percent. Vegetables in particular (plus 9.2 percent) as well as dairy products and eggs (plus 5.5 percent) became significantly more expensive. For the purchase of vehicles (plus 6.4 percent) as well as their maintenance and repair (plus 5.4 percent), people had to pay significantly more than in September 2020.
What do consumer advocates, social associations and trade unions say?
You are demanding that politicians ease the burden on citizens when it comes to energy prices. If the rise in energy and petrol prices continues unchecked, there is a risk of “dramatic social imbalance”, warned Klaus Müller, chairman of the Federal Association of Consumer Centers, recently in “Tagesspiegel”. “Politicians urgently need to reduce the current dependency on energy imports, focus on energy savings and prevent energy poverty,” demands Müller. The president of the social association VdK, Verena Bentele, demands that the state must create social compensation for low-income people. From the point of view of IG-BAU boss Michael Vassiliadis, politics has the levers to relieve the people in its own hands. State taxes and levies account for more than half of the electricity price.
Will inflation continue to rise unchecked?
Inflation rates of at times around 5 percent in Europe’s largest economy are considered possible this year. From the point of view of many economists, however, this is still a temporary phenomenon. “With the end of the corona pandemic in spring and the expiry of special factors such as the interim reduction in value added tax in Germany, inflation should fall again,” argues Commerzbank chief economist Jörg Krämer, for example. Economists currently see no signs of a dangerous upward spiral of rising wages and prices. “So far, there have been no signs of inflation-driving wage settlements of well over 3 percent in Germany,” say BayernLB economists.