Price development - Inflation at 5.9 percent for 2023 as a whole
Inflation in Germany is only gradually easing. 2023 was the second most expensive year for consumers since reunification, with inflation picking up again in December. According to provisional figures from the Federal Statistical Office, consumer prices rose by 5.9% on average over the year. A higher figure in a full year was only seen in reunified Germany in 2022, at 6.9%. Although economists expect inflation rates to fall this year, the path to permanently lower rates is likely to "remain rocky", as Deutsche Bank economist Sebastian Becker puts it.
Commerzbank chief economist Jörg Krämer also believes that the inflation problem has not yet been solved. Political decisions, such as the increase in the CO2 price from 30 euros per tonne of carbon dioxide (CO2) to 45 euros, also play a role. "In the end, inflation is likely to settle at 3 percent rather than 2 percent because wages are rising sharply," predicts Krämer.
DZ Bank chief economist Michael Holstein also expects price pressure to increase for the time being in the new year: "This is mainly due to the higher price of CO2 and the renewed rise in VAT in the catering sector. This is another reason why we are still a long way away from the ECB's two percent mark in Germany in 2024."
The European Central Bank (ECB) is aiming for stable prices in the eurozone in the medium term with inflation at 2.0%. In the fight against high inflation in the single currency area, the monetary authorities have raised key interest rates ten times in a row since summer 2022.
Inflation is also likely to be "very unsocial" in 2024
DIW President Marcel Fratzscher fears that inflation will also be "very unsocial in 2024 and hit people on low incomes much harder". Rents in particular could continue to rise significantly. And energy costs could also increase again because tax relief will no longer be available and the price of CO2 will rise.
Higher inflation rates reduce the purchasing power of consumers, who will then be able to afford one euro less. People's financial leeway is shrinking and income gains are being eroded by inflation. According to studies, people with lower incomes are hit particularly hard because they have to spend a higher proportion of their monthly income on energy and food.
After the Russian attack on Ukraine in February 2022, energy and food in particular became much more expensive. The inflation rate in Germany climbed to 8.8% in autumn 2022. At the beginning of 2023, inflation was still at 8.7%.
Inflation rate picks up again in December
According to preliminary calculations by the Federal Office in Wiesbaden, inflation rose again in December to 3.7 percent after five months of declining figures. In November, the lowest level since June 2021 was reached at 3.2 percent.
An important reason for the turnaround: A year earlier, in December, the state had taken over the costs of the discount for gas and district heating customers on a one-off basis. This price-dampening effect is no longer included in the calculation for December 2023. Energy prices rose by 4.1% compared to the previous month. In the last month of the year just ended, people had to pay 4.5% more for food than a year earlier. From November to December 2023, consumer prices are expected to have risen by 0.1% overall.
According to Sebastian Dullien from the Institute for Macroeconomics and Business Cycle Research (IMK) at the trade union Hans Böckler Foundation, however, the momentum of inflation in Germany has been broken "and the time of really high inflation rates is over".
The highest inflation rate in a full year to date was measured in the Federal Republic of Germany in 1951 at 7.6 percent. However, the calculation method was changed over time.
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Source: www.stern.de
