Rate below 2 percent for the first time since 2021

Inflation in Germany has fallen below 2 percent for the first time since March 2021. However, some products have become significantly more expensive.

For the first time in over three years, the German inflation rate has fallen below the 2 percent mark. Consumer prices rose in August at a rate of 1.9 percent compared to the same month last year, the slowest rate since March 2021, the Federal Statistical Office confirmed its preliminary estimate on Tuesday. Month-on-month, prices fell by 0.1 percent in August.

The prices of energy products had a significant impact on inflation: in August they were 5.1 percent lower than the previous year. Prices for fuels fell by 6.9 percent and those for household energy by 3.8 percent.

In contrast, prices for services rose by an above-average 3.9 percent. Insurance became 12.6 percent more expensive, social services by 7.8 percent and restaurant services by 6.7 percent. Prices for vehicle repairs were also significantly higher than the overall rate, and net rents were slightly higher.

Food prices have only increased by 1.5 percent, despite a high level. Cooking fats and oils were significantly more expensive, with an increase of 15.9 percent; the increases for sugar, jam, honey and other sweets, as well as for fruit, were also higher. Dairy products became cheaper (minus 0.4 percent).

Price pressure on consumers is easing after several years of very high inflation rates. In July, statisticians recorded a rise in consumer prices of 2.3 percent, after 2.2 percent in June. Core inflation excluding energy and food fell by 0.1 points to 2.8 percent in August.

“There are increasing signs that inflation in Germany has been finally defeated,” said Sebastian Dullien, scientific director of the Institute for Macroeconomics and Business Cycle Research (IMK) of the Hans Böckler Foundation, in order to classify the figures. “This means that the often expressed concern that the suspicion of the inflation of the past few months could only be temporary has been misplaced.” This is very good news.

A counter-inflation policy gives the European Central Bank (ECB) room to cut key interest rates. In June, it cut key interest rates by 0.25 percentage points for the first time since the wave of inflation. In July, the ECB kept key interest rates stable and left the door open for a rate cut at the Council meeting on Thursday. The financial markets are firmly expecting a rate cut on Thursday. In the eurozone, the inflation rate for August was estimated at 2.2 percent.