Annual inflation in Germany rose to 6.4 percent in June, ending its three-month decline. While food prices were the determining factor in the increase, it was stated that the end of public transportation and energy supports were also effective.
Germany’s Federal Statistical Office (Destatis) has announced the final data on price increases for June.
Accordingly, annual inflation in Germany, which was 6.1 percent in May, rose to 6.4 percent in June. Thus, the inflation rate in the country ended its decline, which lasted for three consecutive months.
The inflation rate in the country increased by 0.3 percent on a monthly basis. The final data confirmed the previously published preliminary data.
EU-compliant CPI also increased by 0.4 percent in June compared to the previous month and by 6.8 percent on an annual basis.
Food prices are decisive
Energy and food stand out as the biggest price setters in Germany for months. Food prices increased by 13.7 percent and energy products by 3 percent in June compared to a year ago. Food prices increased by 14.9 percent on an annual basis in May.
Inflation, excluding energy and food, was 5.8 percent in June.
Ruth Brand, President of Destatis, said, “Food prices continued to be the biggest driver of inflation in June. In addition, the end of the Federal Government’s incentives in 2022, such as 9 euros per month public transport tickets and fuel discounts, will increase the current inflation rate. There is a base effect,” he said.
Public transport and energy support lifted
A year ago in Germany, three-month-limited measures such as public transport tickets and fuel discounts curbed the rise in consumer prices. Now this effect is gone.
For this reason, while evaluating the current increase primarily as temporary, economists state that the unusually high inflation in the country remains a burden for consumers as it reduces their purchasing power.
Leading German economic research institutes predict that inflation, which was 6.9 percent in 2022 on average, will decrease to an average of 6 percent in 2023 and to 2.4 percent in 2024.
The German Central Bank (Bundesbank) expects inflation in the country to reach 6 percent in 2023 and decline to 3.1 percent in 2024.
Economy in recession
The German economy had technically entered recession, shrinking by 0.3 percent in the first quarter of this year due to the impact of unusually high inflation and rising interest rates on consumer spending.
The economy contracted 0.5 percent in the last quarter of last year.
The country’s economy is negatively affected by the stagnation in domestic demand due to the rise in interest rates, decreased confidence in the economy and high inflation, even though the bottlenecks that emerged during the Kovid-19 epidemic process eased.
The German government expects 0.4 percent growth in the economy this year.