Inflation in Germany rose surprisingly sharply in October. Goods and services rose in price by an average of 2.0 percent compared to the same month last year, the Federal Bureau of Statistics announced on Wednesday. Economists surveyed had expected inflation of only 1.8 percent.
By September it had fallen to 1.6 percent, the lowest level in about three and a half years.
From September to October, the cost of living increased by 0.4 percent. Consumers had to dig deeper into their wallets, especially for services such as package holidays and insurance. These increased in price by 4.0 percent compared to October 2023.
Energy prices fell significantly
Food cost 2.3 percent more. Energy, on the other hand, fell by 5.5 percent. Inflation excluding food and energy – often called core inflation – was expected to rise to 2.9 percent.
Inflation has again risen noticeably and on a broad basis, said Holger Schmieding, chief economist at Berenberg Bank. “For the ECB, persistent inflation in the services sector, where labor costs play a major role, is a warning sign,” he added. “It should not cut its key interest rates excessively.” In view of declining inflation in the monetary union, the European Central Bank (ECB) has already lowered its key interest rate three times this year.
Inflation will rise again
In its current monthly report, the Bundesbank predicts higher inflation. “Inflation is expected to rise again in the coming months,” she stressed. “Part of the reason for this is base effects in the energy sector.” Crude oil prices peaked in September last year and then fell again, which could now fuel inflation.
“Higher inflation can also be expected for food – as a result of the recent increase in commodity prices.” Ultimately, inflation in the services sector is likely to remain elevated for some time to come.
Soon, individual areas will ask customers to pay more
More and more companies want to ask their customers to pay more in the future. The price expectations barometer rose to 15.9 points in October, after 14.1 points in September, the Ifo Institute found in its managers survey. Industrial companies, business-related service providers and retailers in particular want to demand more money.
“In the coming months, the inflation rate is likely to pick up again and reach the European Central Bank’s two percent limit,” said Ifo economic expert Sascha Möhrle.
Source: Krone
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