Germany’s Inflation steady at 2.1% in May

Germany’s annual inflation rate stabilized at 2.1% in May 2025, unchanged from April, according to the final report released by the Federal Statistical Office (Destatis). This follows a gradual decline from the 2.3% inflation seen in January and February. The latest figures highlight a mixed inflation landscape, with energy prices falling and food and service sectors driving up overall costs.

Energy prices continue to decline

Energy prices in Germany were 4.6% lower in May 2025 compared to May 2024, easing inflationary pressure on households. However, this decline was less steep than the 5.4% drop recorded in April 2025, indicating a slight moderation in the rate of energy price decreases.

Key details include:

• Motor fuel prices fell by 6.8%, contributing significantly to the overall energy price drop.
• Household energy costs dropped by 3.0%, benefiting consumers across multiple categories:
  • Electricity prices decreased by 2.4%.
  • Prices for firewood, wood pellets, and other solid fuels declined by 5.4%.
  • Heating oil prices saw a notable reduction of 9.5%.
• Slight price decreases were also observed in district heating (-0.3%) and natural gas (-0.1%).

This gradual easing in energy costs follows several years of volatility influenced by regulatory changes, including CO₂ pricing and temporary VAT adjustments.

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Food and Services Inflation pushes up consumer costs

Despite the drop in energy prices, inflation pressures remain due to rising food and service expenses:

• Food prices increased by 2.8% year-over-year in May.
• Specific food items saw sharp price hikes:
  • Chocolate surged 20.2%.
  • Butter prices rose 17.6%.
  • Other rising items included jam, honey, dairy products, cooking fats, and eggs.
• Conversely, olive oil bucked the trend, dropping 17.2% in price compared to the previous year.

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Services inflation was also significant, with prices climbing 3.4% overall, driven by:

• A sharp 11.4% increase in combined passenger transport costs.
• Insurance prices up by 9.4%.
• Price rises in nursing care, social services, and inpatient healthcare.

Housing costs, measured by net rents, increased moderately by 2.1%.

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Expert Outlook: Inflation to remain Moderate

Economist Silke Tobler from the Institute for Macroeconomics and Business Cycle Research (IMK) commented on the outlook:

“The key takeaway from May’s data is the continued moderation in service price growth. Coupled with the euro’s appreciation and easing energy costs, we expect inflation to stay below 2% in 2026.”

This outlook suggests that while food and service price inflation may persist, the downward trend in energy costs will help keep overall inflation in check.

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