Annual inflation declines slightly - "intact downward trend" expected in 2024
The Federal Statistical Office in Wiesbaden announced the provisional inflation rate for December on Thursday and thus also an initial estimate for 2023 as a whole. In December, the inflation rate rose again significantly by 3.7% year-on-year. However, this was mainly due to a so-called base effect: in December 2022, the federal government took over the monthly discount for private households for gas and heating, meaning that inflation was comparatively low in that month.
In the months leading up to December 2023, the inflation rate fell continuously: from 4.5 percent in September to 3.8 percent in October and 3.2 percent in November. Despite the "turbulent ups and downs", Fritzi Köhler-Geib, chief economist at the state-owned development bank KfW, called for calm: "The main reason for the rise in inflation lies in the past." The base effect makes today's energy prices appear higher in comparison, although they have fallen further in recent months.
Sebastian Dullien, Scientific Director of the Institute for Macroeconomics and Business Cycle Research (IMK) at the Hans Böckler Foundation, also emphasized that the December increase "should be seen as a temporary phenomenon". The downward trend in inflation is "still intact". This can also be seen in the decline in the so-called core rate, i.e. inflation excluding energy and food, and in the declining inflation rate for food.
According to the statistics, this fell from 7.5 percent in September to 6.1 percent in October and 5.5 percent in November to 4.5 percent in December. However, the chief economist at DZ Bank, Michael Holstein, emphasized that the rate was "high by historical standards".
Martin Schirdewan, head of the Left Party, also emphasized that food inflation was well above six percent in 2023. "Inflation is eating into wages and salaries, eroding the purchasing power of social benefits," he said. Schirdewan called on the federal government to impose a price freeze on basic foodstuffs.
"The large supermarket chains must guarantee that a basket of basic foodstuffs is offered at a fixed maximum price. The maximum price of the basket of goods must be based on the standard citizen's income rate for food and non-alcoholic drinks." Basic food requirements include cereal products, potatoes, oil and fruit and vegetables.
The head of the Federation of German Consumer Organizations (vzbv), Ramona Pop, told the Funke Mediengruppe newspapers that falling inflation in no way means that prices are falling - "they are just rising less quickly". She also referred to the still high food prices in supermarkets, which too often resembled a "black box". She once again called for a price monitoring agency "to ensure greater transparency in food prices".
Experts expect price pressure to remain high for the time being at the beginning of the year. This is mainly due to the increased price of CO2 and the renewed rise in VAT in the catering sector. IMK Director Dullien therefore expects inflation in January to be "roughly at the December level".
"The downward trend in inflation is then expected to resume from February", he expects. "Over the course of the year, the German inflation rate is likely to fall towards two percent." For 2024 as a whole, the IMK therefore expects inflation to average 2.5%. Köhler-Geib from KfW also expects an "intact downward trend".
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- Despite the increase in December's inflation rate, KfW Banking Group's chief economist Fritzi Köhler-Geib believes that the "intact downward trend" is expected to continue in 2024.
- According to Destatis, the German Federal Statistical Office situated in Wiesbaden, the downward trend in inflation can be seen in the decline of the core rate and the declining inflation rate for food.
- Sebastian Dullien, Scientific Director of the Institute for Macroeconomics and Business Cycle Research (IMK), also expects the downward trend in inflation to continue, with the German inflation rate likely to fall towards 2% in 2024.
- The IMK forecasts an average inflation rate of 2.5% for 2024, maintaining the "intact downward trend" as expected by Köhler-Geib from KfW.
- The annual inflation declines slightly, and something similar is expected to continue, with experts predicting a continued downward trend in price pressure at the beginning of the year.
- Martin Schirdewan, head of the Left Party, emphasized that food inflation was well above six percent in 2023, urging the federal government to impose a price freeze on basic foodstuffs.
- The head of the Federation of German Consumer Organizations (vzbv), Ramona Pop, urged for a price monitoring agency to ensure greater transparency in food prices, as falling inflation does not indicate that prices are actually decreasing.
- The large supermarket chains must guarantee that a basket of basic foodstuffs is offered at a fixed maximum price, according to Schirdewan, to protect the standard citizen's income rate for food and non-alcoholic drinks.
- In 2024, the KfW Banking Group expects the "intact downward trend" in inflation to continue, which may impact the overall spending and purchasing power of individuals in Germany.
- The decline in inflation is a good sign, but it does not mean that consumers are experiencing a decrease in prices, as the base effect contributes to a decrease in inflation figures without a direct impact on consumers' wallets.
Source: www.stern.de
