Not higher than it has been since 1993: energy prices drive German inflation rates

Life in Germany is becoming more expensive. For the first time since the early 1990s, inflation has risen above the four percent mark. The statistical office has thus confirmed preliminary data. Heating oil and gasoline in particular rose particularly sharply.

In September, expensive energy drove the inflation rate in Germany above the four percent mark for the first time in almost 28 years. The price of goods and services rose by an average of 4.1 percent, said the Federal Statistical Office, which confirmed an earlier estimate. This is the highest level since December 1993, when the inflation rate, fueled by the reunification boom, even climbed to 4.3 percent. In August it was 3.9 percent, in July it was 3.8 percent.

In the coming months, it should go further in the direction of five percent, as companies have not yet fully passed on the cost surge due to increased prices for materials to consumers. As a consequence of increasing shortages, many retailers now also want to raise their prices, as the Ifo Institute found out in its company survey. “The industry has announced price increases and this is now inevitably affecting retailers,” said Ifo expert Klaus Wohlrabe.

The development in energy is once again responsible for the increase in September: it cost 14.3 percent more than a year earlier. “The base effects were essential for this, as we are comparing the current prices with the very low prices of the previous year,” said Christoph-Martin Mai from the statistical office. “The CO2 tax introduced at the beginning of the year also has a particular effect on the rate of price increases for energy products.”

The price of heating oil rose particularly sharply at 76.5 percent, as did fuels and petrol at 28.4 percent. Natural gas (+5.7 percent) and electricity (+2) also cost more than a year ago. Food prices also rose at an above-average rate of 4.9 percent. Vegetables even cost 9.2 percent more, while dairy products and eggs were 5.5 percent more. In addition, consumer goods such as vehicles (+6.4 percent) or furniture and lights (+4.4 percent) also rose significantly. Services cost 2.5 percent more, with apartment rents increasing by 1.4 percent.

However, the strong inflation is also due to temporary special effects. These include the extremely low starting level for raw material prices, pandemic and lockdown-related catch-up effects or the temporary VAT reduction in the fight against the corona crisis in the second half of 2020.