Augmented price rise: August saw a 1.9% inflation rate.
Last month saw a slight decrease in prices, shrinking by 0.1%. The main cause behind this reduction in inflation was a substantial drop in energy prices by 5.1%, as compared to the same period a year prior. In July, energy prices had plummeted to -1.7%.
Preliminary data shows that food prices climbed by 1.5%, continuing their upward trend at a below-par pace. However, the price surge was less significant in the previous month, standing at 1.3%. On the contrary, service prices have been seeing a considerable incline. The inflation rate has consistently remained at 3.9% since May.
Christoph Swonke, a representative from DZ Bank, attributes the reduction in inflation primarily to the momentary dip in energy prices. Swonke believes that the current apprehensions about the US recession lowering the oil price are overblown, indicating a potential increase in the oil price in the long run. Additionally, Swonke emphasized the "steadfast" price surge in services.
Sebastian Dullien, scientific director of the Institute for Macroeconomics and the Conjuncture Research of the Hans-Böckler-Foundation, is optimistic about inflation in Germany being defeated. According to Dullien, Germany has reached the inflation target of the European Central Bank for the first time since the commencement of high inflation in 2021. Dullien persists in advocating for a reduction in the ECB's key interest rate in September.
Carsten Brzeski, an analyst from ING, agrees that the conditions for a softening of the ECB's monetary policy are largely in place. However, Brzeski voiced concern over the possibility of an uptick in inflation in the intermediate term. "The wage data released today is a source of worry," Brzeski stated, citing the Federal Statistical Office's revelation of a fifth consecutive quarter of real wage growth.
Real wages saw an increase of 5.4% compared to the same period last year. Consumer prices rose by 2.3% in the second quarter, resulting in a real wage increase of 3.1%. Brzeski also pointed towards impending wage negotiations and high union demands. He suggested that these escalating wages could fuel additional inflationary pressure.
Chancellor Olaf Scholz (SPD) celebrated both developments, expressing satisfaction by stating, "People now have more money in their wallets. Inflation is decreasing, real wages are rising for the fifth consecutive quarter." Scholz expressed his intention to continue working towards these positive trends.
Germany experienced a decrease in energy prices, contributing to the overall reduction in inflation last month. Despite this, service prices have been experiencing a significant incline, maintaining an inflation rate of 3.9% since May.
