Inflation rate remains high: Experts expect four percent inflation


The rate of inflation remains high
Experts expect four percent inflation

Food and clothing cost noticeably more. Inflation is also being fueled primarily by the rise in energy prices. For the coming months, economists continue to expect increasing price pressure.

Despite a slight decline, inflation in Germany remains comparatively high. As expected by experts, goods and services cost an average of 2.3 percent more in June than a year earlier, as the Federal Statistical Office announced in its first estimate. In May, the inflation rate climbed to 2.5 percent, its highest level in almost ten years.

Economists continue to expect increasing price pressure. Because clothes, overnight stays and visits to restaurants have become noticeably more expensive, said Commerzbank expert Marco Wagner. “In the coming months the inflation rate will rise again noticeably and will amount to almost four percent towards the end of the year.”

The biggest driver of consumer prices in June was again energy, which cost 9.4 percent more than a year ago. In Baden-Württemberg, for example, refueling cost almost 27 percent more than in June 2020 and in North Rhine-Westphalia almost 24 percent more. Food prices rose by 1.2 percent nationwide, and services cost 1.6 percent more.

The effect of the VAT hike has an impact

Experts had expected the slight decline in June. “But it is only a short respite in the rise to the inflation summit,” said LBBW economist Jens-Oliver Niklasch. “Starting next month, the effect of the VAT increase will have a full impact on the calculation of inflation.” DZ Bank chief economist Michael Holstein saw it similarly: “The three percent mark could be cracked as early as July.” Because prices were depressed by the temporarily reduced VAT in the second half of 2020 – and now this effect is reversed.

The financial markets are keeping a very close eye on the rise in inflation in many regions. The European Central Bank (ECB) sees a price increase of just under two percent as ideal for the economy in the euro area in the medium term. Inflation will remain an issue at least until the end of 2021, emphasized Niklasch. “The question is whether beyond that too.” So far there is little evidence of this. “But the risk is currently growing because the costs have increased significantly on the upstream stages.”

In addition, it could be easier for companies to pass on higher prices to customers next year. German imports rose more in May than they have been for almost 40 years. Import prices rose by 11.8 percent within a year – the largest increase since the second oil price crisis in October 1981.

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