The inflation rate has dropped to a three-and-a-half-year minimal level.
Anticipated consumer price increase for this month, as per economic analysts, is approximately 2.1%. This marks the lowest inflation rate since April 2021. However, industry experts remain cautious.
As per forecasts from a dozen financial institutions, German inflation has potentially hit its lowest level in over three years during August. The projected annual increase in consumer prices is 2.1%. A decline from July's 2.3%, which itself was a minor upswing from June's 2.2%.
The German Federal Statistical Office is set to release a preliminary August estimate on Thursday. Experts attribute the drop in energy prices to the recent month. Prices for gasoline, diesel, and heating oil have seen a decrease in August compared to previous months. In fact, the ADAC automobile club reports that gasoline prices have reached their lowest point of the year recently.
However, although energy prices have dropped, most economists are hesitant to declare victory over inflation. High wage agreements have led to a significant increase in service prices, forcing many companies to pass on their increased personnel costs to consumers. Service prices climbed by an above-average 3.9% year-on-year in July. This upward trend in selling prices within the German economy reached its highest point in half a year, according to S&P Global's survey of numerous companies.
"This upward trend can be attributed to the fact that service providers have slightly increased their offer prices," explains S&P Global's analysis. The European Central Bank's (ECB) inflation target for the currency area stands at 2%. With the target now within reach, speculation on the financial markets regarding a potential interest rate cut in September has risen. The ECB reduced interest rates from a record high of 4.50% to 4.25% in June and will adjust its strategy based on future data.
Despite the drop in energy prices, the increase in service prices due to high wage agreements is causing concern. This has led to a significant increase in consumer prices, with service prices rising by 3.9% year-on-year in July. Thus, while inflation for August in Germany is projected to be 2.1%, it remains above the ECB's target of 2%.
