Inflation in Germany remains at a high level. The reason for this is continued rising prices for food, but also electricity. Consumers feel what is happening on the global energy markets.
The inflation rate in Germany remains high despite slight declines. In August this year, consumer prices were 6.1 percent higher than a year earlier, the Federal Statistical Office today confirmed an earlier estimate. In July the inflation rate was 6.2 percent, after rising to 6.4 percent in June. From July to August prices rose by 0.3 percent.
In detail, however, the increase in prices varies greatly. Prices are currently particularly high for electricity, except for food. “Price increases for food and energy are above overall inflation and are keeping the inflation rate high,” said the President of the Statistics Office, Ruth Brand.
16 percent more for electricity than in the previous year
Energy prices rose above average by 8.3 percent in August, after prices had only risen by 5.7 percent in July. Electricity in particular cost significantly more, with an increase of 16.6 percent, compared to August 2022. Fuels such as gasoline rose relatively moderately in price at 3.7 percent, while light heating oil even became cheaper by 28.1 percent.
After electricity costs have fallen in recent months, they are now rising significantly again. The reason: The sharp increase in international trading prices for natural gas in August. These rose on the Amsterdam stock exchange from 25 euros per MWh to almost 45 euros per MWh and are currently around 36.20 euros per MWh.
Strike in Australia causes gas prices to skyrocket
The background to the increase in gas prices was the fear that strikes could occur among major gas exporters in Australia. In fact, workers at a liquefied natural gas plant owned by the energy company Chevron in Australia went on strike today. As a result, the European gas price shot up again by eleven percent.
Supply stops could lead to increased competition for LNG imports between major European gas consumers and Asian countries. That would cause gas prices to rise worldwide.
How the price of electricity is linked to gas
Thanks to the so-called “merit order principle”, the price of electricity is closely linked to the gas market. Accordingly, in Germany the cheapest energy technologies are fed into the electricity market first. These are often solar and wind power. If demand increases, more expensive energy sources are added, with the last power plant switched on determining the electricity price.
With the start of the Russian war against Ukraine, the price of natural gas rose sharply. Gas-fired power plants are therefore the most expensive power plants on the market – and have to rank at the bottom of the merit order. Nevertheless, they can significantly increase the price of electricity when demand for electricity is high.
What private households pay
For private consumers, this means that electricity for new customers currently costs 30.4 cents per kWh, according to the comparison portal Verivox. Existing customers even pay 39.6 cents. The low point was therefore in June at 28 cents per kWh. Since then it has steadily increased again with slight fluctuations. Since energy companies have longer-term supply contracts, the increase in prices on the electricity exchange usually only becomes noticeable in consumer tariffs with a delay.
“Households in Germany must therefore prepare for a permanently higher price level,” said Verivox energy expert Thorsten Storck. “However, the prices of individual electricity suppliers can fluctuate greatly,”
Bread is also significantly more expensive
Food prices rose by 9.0 percent in August. Consumers had to pay noticeably more, particularly for sugar, jam, honey and other confectionery: here the surcharge was 17.1 percent. But bread and grain products (+13.6 percent), vegetables (+12.4 percent) and fish, fish products and seafood (+11.5 percent) also became noticeably more expensive. In contrast, cooking fats and oils fell in price by 13.9 percent.
At least on the world market, food prices are falling again. According to the Food and Agriculture Organization (FAO), they have fallen to their lowest level in more than two years. The corresponding barometer, which tracks the world’s most traded foodstuffs, fell to 121.4 points in August after 124.0 in the previous month.
The barometer is almost a quarter below the record high measured in March 2022, which was reached immediately after Russia invaded Ukraine. Dairy products, vegetable oils, meat and grains have become cheaper, it said. Rice, on the other hand, is an outlier: the highest value was measured here in 15 years. The Indian export restrictions are cited as the reason for this.
Forecasts for Inflation development
Leading institutes such as the Munich ifo expect an inflation rate of around six percent for the year as a whole. Annual inflation will then decrease noticeably and will be 2.6 percent in 2024 and fall to 1.9 percent in 2025.
Currently, many retailers and innkeepers in particular want to increase their prices in the coming months, according to an ifo survey. Overall, the wave of inflation is likely to continue to subside. “The decline in inflation will take a long time,” said ifo economics director Timo Wollmershäuser.
With information from Emal Atif, ARD financial editorial team.