Purchasing power suffers – inflation in Germany rises to 10 percent

Inflation in Germany has jumped to its highest level in about 70 years. Driven by rising energy and food prices, consumer prices rose 10.0 percent in September compared to the same month last year, the Federal Bureau of Statistics announced on Thursday in an initial estimate. An increase of 7.9 percent was recorded in August. Economists also expect double-digit inflation in the coming months.

In reunified Germany, inflation rates at present levels have never existed. In the old federal states, rates of ten percent and more were measured in the early 1950s, but the method of calculation has changed over time.

60 percent already limit themselves
Higher inflation rates reduce the purchasing power of consumers, who can afford one euro less. People’s financial resources are shrinking. According to a survey by the German Retail Association (HDE), 60 percent of consumers already limit themselves when shopping. For the coming months, 76 percent of those surveyed are preparing to shop more frugally.

“Many households are currently being forced to spend significantly more money on energy or set it aside for significantly higher heating costs. Accordingly, they have to cut back on other expenses, such as new purchases,” explained Rolf Bürkl, an expert at Nuremberg consumer researcher GfK, recently. This has implications for Europe’s largest economy, as private consumption is an important pillar of the economy.

The tense situation worsened
Energy and food have been the biggest price drivers for months. The Russian attack on Ukraine and supply bottlenecks have exacerbated an already tense situation. In September, energy cost 43.9 percent more than a year earlier and food prices rose 18.7 percent.

Compared to August, consumer prices rose by a total of 1.9 percent in September.

exemption expired
The fuel discount introduced by the German federal government and the 9 euro ticket for local public transport have provided some relief in recent months. Both measures expired at the end of August. The government in Berlin plans further aid. For example, retirees, students and trainees receive a one-off fixed energy price. Child benefit is increased at the beginning of the year. The federal government wants to temper rising gas prices with a gas price brake.

Measures are also being discussed at the level of the European Union. On Friday, EU energy ministers will hold a special meeting in Brussels.

Far from the ideal goal
The European Central Bank (ECB), which is fighting record high inflation with higher interest rates after a long period of hesitation, is aiming for medium-term price stability in the euro area of ​​2% inflation. According to the latest data, inflation in the common currency area reached an all-time high in August. Compared to the same month last year, consumer prices rose by 9.1 percent, the Eurostat statistics recently reported. It is the highest rate since the introduction of the euro as book money in 1999.