May sees inflation rise to 2.4%

Shoppers are warned to be wary of potential scams and fraudulent activities this holiday season. Shoppers Be Aware of Holiday Scams and Fraud - May sees inflation rise to 2.4%

Germany's inflation rate nudged up in May after remaining stagnant for several months, with consumer prices rising 2.4% year-on-year, the Statistical Office in Wiesbaden reported. The increase, which had been anticipated, was primarily attributable to higher service prices, which have been steadily climbing since the beginning of the year, according to agency head Ruth Brand. However, energy and food prices have tethered overall inflation in check.

Considering the same month last year, prices for services had risen by a considerable 3.9%. Insurance and other financial services were the worst hit, with an increase of 13.0%. Fees for social institutions, including healthcare and education, were up 7.7%, while the cost of dining out rose 6.9%.

Food prices saw a slight 0.6% uptick, marking the first increase this year. While dairy products and some fresh vegetables were cheaper, cooking oils and fats, including olive oil, ended up being more expensive, climbing by 8.4% and 48.5%, respectively.

Revoking the temporary reduction in value-added tax meant energy prices rose by 1.1%. This followed the decision to return to the standard 19% rate for natural gas and district heating from April 1st. In a bid to offset the rise in energy prices caused by Russia's invasion of Ukraine, the government had earlier relaxed the VAT rate to 7%.

Year-over-year change in inflation

The cost of living for German consumers increased by a negligible 0.1% in May compared to the previous month of April. The agency confirmed the preliminary data. Higher consumer prices weaken purchasing power - meaning consumers can buy less with a given amount of money.

Inflation is likely to moderate considerably in the coming months. Leading economic research institutes forecast that Germany's largest economy will experience a significant decrease in inflation to 2.3% in 2023, down from 5.9% in 2022.

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1. Ruth Brand, the head of Germany's Federal Statistical Office (Destatis), attributed the increase in service prices to various sectors, such as insurance and dining out.
2. The rise in consumer prices in May led to a decrease in purchasing power for German consumers, meaning they can buy less with the same amount of money.
3. The Statistical Office in Wiesbaden reported that food prices saw a slight increase of 0.6% in May, with cooking oils and fats becoming more expensive.
4. Facing challenges due to Russia's invasion of Ukraine, the German government temporarily reduced the value-added tax (VAT) rate for energy prices, which later increased by 1.1% after revoking the reduction.
5. According to leading economic research institutes, Germany's inflation rate is expected to moderate significantly in the coming months, decreasing to 2.3% in 2023, down from 5.9% in 2022.
6. Shoppers should be aware of potential scams and fraudulent activities, as they may be more susceptible due to the increasing economic situation and rising consumer prices caused by inflation.
7. The release of Destatis's data showed that overall inflation in Germany was predominantly affected by service prices and energy costs, including foodstuffs like cooking oils and fats, which reached high prices, such as olive oil at 48.5% higher than the previous year.

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