The price of meat and fruit in Germany rose almost nine percent in March compared to the previous year, according to new data from the Federal Statistical Office. The overall inflation rate was, however, kept relatively low due to falling oil prices.
The data shows that food prices in Germany underwent a significant increase in March 2020, rising by 3,7 percent compared to March 2019. This is the largest increase in two and a half years.
Oil prices, on the other hand, have plummeted, making energy 0,9 percent cheaper than last year. According to statisticians, the price for heating oil fell the most, slumping by almost a fifth, while fuels became 3,3 percent cheaper. This drop in oil prices is due to two main reasons: the price war between Saudi Arabia and Russia, and the global recession caused by the coronavirus pandemic.
On the other hand, prices for electricity and natural gas have inflated by 4,5 and 2,3 percent, respectively.
Falling oil prices therefore balanced the hike in the cost of food to significantly dampen inflation in Germany. In March, consumer prices rose by an average of just 1,4 percent compared to March 2019. According to the European Central Bank, the ideal inflation rate for an economy is just under two percent.
While the inflation rate has remained at a low level in Germany in recent years (1,4 percent in 2019), this year it is expected to reach an all-time low of 0,6 percent. This is due to the strong likelihood of there being a recession caused by the global coronavirus pandemic.
“For example, private households are likely to hold back for the time being on consumer spending which brings them into contact with other people and thus increases the risk of infection. The lower demand in these areas tends to dampen prices,” the Federal Statistical Office reported.
However, this does not mean that everything will become cheaper. In areas where supply is limited, due to disrupted supply chains or a lack of workers, it is actually expected that prices will increase.