Persistent low inflation rates yet prices for food goods remain high
Article:
Germany's inflation rate stays above target as food prices rise and energy costs decrease
Germany's inflation rate remained unchanged at 2.1% in May, although it remains slightly above the European Central Bank's (ECB) target of 2%, according to preliminary data from the Federal Statistical Office. The prevailing factors influencing this figure include rising food prices and decreasing energy costs.
In comparison to the same month last year, the average price of goods and services increased by 2.1%. This marks a continuous increase in prices since April, when inflation also stood at 2.1%. Notably, from April to May, the price of goods only rose by 0.1%, accompanied by a 0.6% decrease in the cost of services.
The cost of energy had a significant impact on the country’s overall inflation rate. Energy prices decreased by 4.6% compared to the same month in the previous year, a slight reduction from the 5.4% drop seen in April. Lower world market prices for crude oil, due in part to the trade war initiated by U.S. President Donald Trump, are believed to be driving this trend, as they are thought to be impeding global economic growth and thereby reducing oil demand.
Conversely, food prices serve as the primary driver of inflation in Germany. In May, they increased by 2.8%, mirroring the same percentage point increase seen in April. For instance, prices for non-alcoholic beverages and fruit have risen by 8.9% and 8.6% respectively in North Rhine-Westphalia.
The inflation rate excluding food and energy, or 'core inflation', reached 2.8% in May (previously 2.9% in April). This figure indicates a smaller contribution from energy prices to overall inflation; however, it continues to be above the ECB's target.
Jörg Krämer, Commerzbank's chief economist, believes the inflation data for May contains flaws. He notes that once volatile energy and food prices are excluded, the inflation rate remains at 2.8%, significantly exceeding the ECB’s desired 2% target. Additionally, while the increase in service prices has slowed, the cost of goods has recently started to rebound, indicating that inflation remains persistent.
Sources: ntv.de, jpe/rts
Keywords: Inflation, Germany, ECB, Energy prices, Food prices
- The community should scrutinize Germany's continued compliance with its employment policy, considering the industry's reliance on energy prices and food costs.
- As a professional in finance, it's essential to understand the impact of inflation on personal-finance and wealth-management, particularly when it comes to Germany's fluctuating energy and food prices.
- In light of Germany's persistently high inflation rate, it might be prudent for businesses to adopt flexible employment policies that account for economic volatility.
- It's intriguing to observe the parallels between the lifestyle and food-and-drink sectors, as evidenced by the steady rise in food prices, and the financial implications of this trend for the average consumer.
- Investors should take note of the ongoing trade war and its potential impact on global economic growth, energy prices, and subsequently, employment policies in industries such as energy and lifestyle.
