For two months in a row, Germany reported inflation of just over three percent – and therefore just below the ideal value set by the ECB. Now the tide seems to be turning again: inflation is expected to reach three percent again in May.
According to the German Bundesbank, consumers in Germany will have to prepare for strongly fluctuating inflation in the coming months. Inflation will probably initially fall again in April, according to the monthly report from the German central bank presented on Thursday. “However, in May the rate could jump back to around 3 percent, as the introduction of the Deutschlandticket had dampened the price level a year earlier,” the report said.
Critical time for monetary authorities
In addition to the disappearance of these statistical base effects, inflation is also likely to increase, mainly due to the recent increase in oil prices and continued strong wage growth. The German inflation rate, calculated according to European standards, was 2.3 percent in March, only slightly above the two percent level that the European Central Bank (ECB) targets for the entire euro area. The rises and falls in inflation now forecast by the Bundesbank come at a time when the ECB is heading for an interest rate cut.
Chief economist Philip Lane recently predicted fluctuating inflation levels in the eurozone in the short term. One must be aware that the current phase of declining inflation rates will inevitably be ‘bumpy’. In particular, energy price fluctuations in 2023 would have a statistical impact on monthly inflation values in the current year.
Positive signals are not yet sufficient for an upturn
According to the Bundesbank, despite recent positive signals, the German economy is not yet on the verge of a sustained recovery. “The economy in Germany has improved somewhat, but a thorough recovery is not yet assured,” the monthly report said. After all, the European economy could be spared a recession. According to the German Bundesbank, gross domestic product is likely to have “increased slightly” in the first quarter, after contracting by 0.3 percent at the end of 2023.
“This expectation is supported by recently slightly higher industrial production, which was also supported by increased exports of goods,” the central bankers explained. Moreover, the exceptionally mild weather in February resulted in an exceptionally strong increase in construction production. However, industrial production remains weak in many sectors, while construction is likely to decline significantly again without the supportive effect of the weather.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
