Food significantly more expensive: price increase slows down – Germany ticket helps

Food significantly more expensive
Price increase weakens – Germany ticket helps

The period of high prices is not over – but their further increase is slowing down, at least for the moment. Inflation in May is the lowest it has been in more than a year. However, the cost of food and travel is rising sharply.

The price increase in Germany continues to weaken. However, the cost of services and goods remains at a high level. Consumer prices rose at the slowest rate in more than a year in May. Goods and services cost an average of 6.1 percent more than a year earlier, according to an initial estimate by the Federal Statistical Office. In April, the inflation rate was 7.2 percent. Economists had only expected a decline to 6.5 percent.

The development of energy prices eased the situation: they only rose by an average of 2.6 (April: 6.8) percent, with refueling even becoming cheaper in many federal states. The 49-euro ticket for local public transport introduced at the beginning of the month also dampened inflation, as it lowered the transport costs for the more than ten million buyers.

Food prices rose again significantly by 14.9 percent, but not as much as in April with 17.2 percent. Services cost an average of 4.5 percent more than a year earlier (April: 4.7 percent). In some areas, however, price pressure remains high. Package tours, for example, rose in price by 13.6 percent in Bavaria and Saxony.

“It turns out that after the pandemic, Germans want to enjoy life again and really go on vacation despite tight budgets,” said Holger Schmieding, chief economist at Berenberg Bank. “This makes it easier for providers to pass on higher costs to consumers in these areas.”

“It will get more complicated in the coming months”

Experts do not rule out that the inflation rate will rise again. “In the coming months it will be more complicated,” said ING chief economist Carsten Brzeski. “Because then we get base effects from the 9-euro ticket and fuel discount, which increases the inflationary pressure again.” Both were introduced by the federal government for June, July and August 2022 to relieve the burden on citizens. At the same time, gas prices are extremely low, while price pressure in the industry is easing significantly.

“However, the service sector is still very inflationary,” said the ING chief economist. That means nothing other than that suppliers there continue to screw up prices. The inflation rate could therefore move towards seven percent again in the summer before dropping to a good four percent by winter.

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