Energy prices drive inflation

Inflation in Germany is rising for the third time in a row. The main reason for this is the rising prices for heating oil and gasoline. But food is also becoming more and more expensive.

Inflation in Germany is picking up speed. In March consumer prices rose by 1.7 percent compared to the same month last year, as reported by the Federal Statistical Office. This means that the rate of inflation was positive for the third month in a row after the VAT cut expired at the end of 2020. Compared to the previous month, inflation rose by 0.5 percent. In February the inflation rate was 1.3 percent.

Refueling will be expensive

In particular, the rising prices for energy have an impact on consumer prices. According to the statistics office, energy prices rose by an above-average 4.8 percent within the year. In detail, the data are even more informative: If you compare the inflation rates with the previous month of February, the plus becomes even clearer. Above all, I increased the price of heating oil by 19.4 percent compared to March. In the case of gasoline, the increase is 12.7 percent. In addition to the CO2 levy introduced at the beginning of the year, the price decline a year ago is also having an effect, as the experts note. The comparative value in the previous year was therefore low. Electricity prices, on the other hand, remained relatively constant.

Vegetables have become cheaper

Groceries have also become more expensive overall. Here the plus compared to March of the previous year is 1.6 percent. Consumers had to pay more for fruit and dairy products in particular: the prices rose by 2.5 percent each. However, compared to February, food prices remained unchanged. However, among other things, edible fats and oils have become more expensive, while vegetables have become cheaper. The European Central Bank (ECB) is keeping a close eye on inflation developments in Germany, Europe’s largest economy. It is aiming for inflation of just under two percent for the monetary union in the medium term. The German inflation rate calculated according to European standards was 2.0 percent in March.

Special factors drive inflation

Ann-Katrin Petersen, investment strategist at Allianz Global Investors, emphasizes, however, that currently there are mainly temporary special factors, which pointed to a noticeable increase in inflation rates in the coming months. The expert points to the economic slump of the previous year – and the now rising raw material prices, the noticeable catch-up effects in private consumption and possible bottlenecks in the service sector following a relaxation of the distance rules and contact restrictions. It is uncertain whether the current trend will manifest itself in the long term.