German inflation rate rises against expectations in July
Inflation in Germany surprises with a rise in July. Consumer prices increased by an average of 2.3 percent compared to the previous year, according to the Federal Statistical Office. Inflation in Germany has surprisingly increased in July. Goods and services became 2.3 percent more expensive on average compared to the previous year, as reported by the Federal Statistical Office in a preliminary estimate. Economists surveyed by the news agency Reuters had expected the inflation rate to remain at the June level of 2.2 percent. Prices rose by 0.3 percent from June to July.
The main drivers of inflation in July were services, which became 3.9 percent more expensive on average. Economists attribute this to significantly increased wages, which many companies pass on to customers.
Energy, on the other hand, became 1.7 percent cheaper. Food cost an average of 1.3 percent more than in July 2023. The so-called core inflation rate, which excludes volatile energy and food prices, remained at 2.9 percent.
Economists at Deutsche Bank Research expect an average inflation rate of 2.2 percent for the whole of 2024, followed by a decline to 2.1 percent in 2025. Last year, the cost of living here increased by an average of 5.9 percent, mainly due to expensive food. According to the July survey by the Ifo Institute, more companies in the industrial sector plan to raise their prices than in the previous month, while consumer-related sectors plan to do so less frequently. Therefore, the inflation rate is likely to decrease in the coming months, said Ifo's economic expert Sascha Moehrle.
The European Central Bank's (ECB) inflation target is two percent. Market participants are speculating about a further interest rate cut in September. The ECB had reversed the interest rate hike in June and made its further course dependent on the data situation.
The unexpected inflation rise in July might lead some consumers to adjust their spending habits. Despite energy prices decreasing, overall goods and services become more costly due to inflation, as indicated by the Federal Statistical Office.
Economists' predictions for the yearly inflation rate in 2024 and 2025 are lower than the surprising July figure, providing hope for a potential decrease in inflation rates in the coming months.
