Inflation in Germany rose above 5 percent in February
Inflation in Germany rose again in February, according to new figures from the Federal Statistical Office (Destatis). With Russia’s invasion of Ukraine causing worldwide uncertainty, especially on the energy market, high inflation doesn’t look to be going anywhere anytime soon.
Consumer prices in Germany rose 5,1 percent in February
After falling slightly in January, the inflation rate in Germany worsened in February. On average, consumer prices were 5,1 percent higher than in the same month of the previous year, according to provisional figures from Destatis. In January 2022, the inflation rate fell slightly to 4,9 percent after hitting 5,3 percent in December, the highest level in the federal republic in almost 30 years.
The main driver of the high inflation rate is rising energy prices, with the cost of household energy and fuel rising by 22,5 percent in February. But the cost of food and other goods and services is also rising significantly. A report from North Rhine-Westphalia found that the price of heating oil rose by 37,7 percent between February 2021 and 2022, while fuel prices rose 23,9 percent, the cost of vegetables by 4,2 percent and women’s clothing by 3,9 percent.
War in Ukraine fuelling inflation rate
Experts had expected inflation to gradually ease over the course of 2022, after the spikes at the end of last year, but German officials say the outbreak of war between Russia and Ukraine has been “superimposed” on existing problems, including rising prices for energy, delivery bottlenecks and producer cost surges as the world makes its way out of the coronavirus crisis.
Since Russia is one of the world’s major energy suppliers, the west’s decision to impose sanctions and countermeasures against the Kremlin is expected to lead to energy prices rising even further, which in turn will further fuel inflation. Since most of the sanctions were only implemented at the end of February, their impact on the inflation rate will likely not be felt until March.
“Since the statisticians collect the inflation data around the middle of the month, they could not in the February data take into account that energy prices have continued to rise because of the war in Ukraine,” said Jӧrg Krӓmer, Chief Economist at Commerzbank, to the Frankfurter Allgemeine Zeitung. “If energy prices remain at the current level, the inflation rate in March could clearly exceed the 5,5 percent mark.”
The German Economic Institute (IW) has predicted that the inflation rate could rise as high as 6,1 percent in 2022 if the war in Ukraine escalates and causes higher gas prices. In 2021, consumer prices already rose by 3,1 percent, the highest rate recorded since 1993.