Inflation in Germany rose to its highest level since the end of 2023 in September amid high energy costs caused by the war in Iran. Consumer prices increased by 3.3 percent compared with the same month a year earlier, according to a first estimate released by the Federal Statistical Office in Wiesbaden on Wednesday. In August, the increase stood at 2.9 percent, with energy prices in particular recording a significant rise.
According to the statisticians’ preliminary figures, energy products became 14.9 percent more expensive in September, making the increase even stronger than in August, when energy prices rose by 10.5 percent.Food inflation increased at a significantly lower rate. In September, food prices were expected to be 0.4 percent higher than in the same month a year earlier. In August, the increase had been 0.1 percent.
Price growth for services also eased slightly. Service prices rose by 2.7 percent in September, compared with an increase of 2.8 percent in August. Core inflation, which excludes food and energy, remained unchanged at 2.4 percent.
KfW Chief Economist Dirk Schumacher attributed the increase in inflation to 3.3 percent in September to the sharp rise in energy prices. However, he said the stability of core inflation and the continued slight decline in service inflation showed that the overall inflation picture remained “moderate” and that there were no signs of the high energy prices “spilling over” into other price segments. He added that there was still a risk that high energy prices “could nevertheless lead to a broader increase in inflation at a later stage.”
Inflation expert Silke Tober of the Institute for Macroeconomics and Economic Research (IMK), which is affiliated with the Hans Böckler Foundation and closely linked to Germany’s trade unions, warned of a high risk that the economic recovery could be interrupted because of the burden on the economy and private households. “Therefore, targeted measures” such as the fuel discount taking effect from Thursday were “sensible,” she said, because they not only provide relief but also counteract the entrenchment of inflation.
Christoph Swonke, an economic analyst at DZ Bank, also attributed the increase in the inflation rate to the rise in oil prices following the blockade of the Strait of Hormuz, as well as limited refinery capacity, particularly for diesel.
However, Swonke was sceptical about the effectiveness of the fuel discount. He said it would provide “a small relief at the pump” but was “not a sustainable solution to the problems at the Strait of Hormuz and the lack of refinery capacity.” The expert therefore expects the inflation rate to remain above the three percent mark for the time being.
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