Service costs hamper further reduction in inflation.
Ruth Brand, the Federal Statistical Office's President, noted that inflation is rising slightly once more, primarily due to the continuous rise in service costs. In contrast, energy and food prices have been currently suppressing overall inflation since the beginning of the year. The core inflation rate, which excludes food and energy price fluctuations, continues to be 3.0%.
Despite the removal of the price cap in January, a rise in CO2 prices, and an increase in gas and district heating VAT from April, energy product prices were less expensive than the previous year. Firewood, electricity, and natural gas saw considerable price drops. Mineral oil products experienced a slight price increase, while district heating took a significant jump in cost.
Food prices rose by 0.6% in comparison to the previous year. Dairy products and fresh vegetables were significantly less expensive in May than the previous year. Sweets like sugar, jam, honey, and cooking fats and oils saw a slight price hike, particularly due to a considerable price increase for olive oil. Fruit, meat, and bread prices also increased, although not as strongly.
Services were 3.9% more expensive, an increase compared to the 3.4% increase in April. The Germany Ticket, which mitigated the service price rise, expired in May 2023.
Sebastian Dullien, the Institute for Macroeconomics and Business Cycle Research's (IMK) scientific director at the Hans Böckler Foundation, added that the slight rise in inflation in May is not cause for worry. The general downward trend in inflation remains firm, with specific factors like the Germany Ticket affecting the rise in May.
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The continuous rise in service costs is contributing to the decreased ability for a further reduction in inflation, according to Ruth Brand. Despite the price hikes in certain energy and food products, overall inflation has been held down since the beginning of the year. The Destatis report shows that services saw a 3.9% increase in price development, with foodstuffs experiencing a 0.6% rise. The Institute for Macroeconomics and Business Cycle Research suggests that the slight increase in inflation in May is not concerning, with specific factors like the Germany Ticket influencing the rise. The decrease in inflation rates continues to be a general trend, despite the increase in prices for certain services and foodstuffs.
