Significant price increases: inflationary pressure in Germany in May above expectations | News

According to Eurostat, the Harmonized Index of Consumer Prices (HICP) increased by 1.1%. compared to the previous month and was by 8.7 (April: 7.8) percent. higher than in the same month last year. Economists polled by the Dow Jones Newswires predicted monthly inflation of just 0.4 percent and annual inflation of 8.1 percent. The domestic consumer price index rose by 0.9 percent over the month and 7.9 (7.4) percent over the year. Ratios of only 0.5 and 7.5 percent were expected.

Goods grew at the rate of 13.6 (12.2) percent. per year, including energy by 38.3 (35.3) percent, and food by 11.1 (8.6) percent. The increase in prices of services amounted to 2.9 (3.2)%, and housing rents amounted to 1.7 (1.6)%.

According to Destatis, the significant increase in prices at higher economic levels has resulted in higher prices. On top of that, there would be the price-driving effects of disrupted supply chains in the wake of the koruna pandemic. “The last time inflation in Germany was as high as it was in May 2022 in the winter of 1973/74, when oil prices also rose sharply in the wake of the first oil crisis,” statisticians said.

Lindner: Fighting inflation must have the highest priority

Federal Finance Minister Christian Lindner (FDP) has identified the fight against inflation as the “top priority” of the government’s economic and financial policy and underlined the intention to re-budget for the coming year’s debt brake under the Basic Law. “We need to break the inflation spiral, which is currently the top priority in economic and financial policy,” Lindner said at a press conference. “Inflation is a huge economic risk and we have to fight it so that it does not become an economic crisis and not a spiral through which inflation feeds.”

It is important to remove “price pressures” by not using state financial power to generate subsidies in scarce sectors, for example. The expansive financial policy will come to an end. In connection with the agreement on a comprehensive 100 billion euros armed forcesSonderfund Lindner said it would end a long period of military neglect. However, this means “no easing of the debt brake”. Now the point is “that money becomes the real qualification for the Bundeswehr.”

Therefore, there would have to be an “Accelerated Purchasing Initiative” and a strategic need-based discussion. “The debt brake will apply to everything except the Bundeswehr’s special fund from 2023,” emphasized Lindner. This also applies to additional tasks in security policy, such as cyber defense, financial aid and civil protection. Lindner rejected a proposal by Federal Labor Minister Hubertus Heil (SPD) for social money for the climate. Such ideas “are not covered by the coalition agreement.” In return, the chairman of the FDP proposed a tax reform that would bring relief to the broad majority of the population.

DIW: The federal government needs to better alleviate the social hardship associated with inflation

In view of the highest inflation in 50 years, the German Institute for Economic Research (DIW Berlin) calls for more political help for people with very low incomes. Because the price increase has probably not yet reached its peak.

“We are experiencing highly anti-social inflation as low-income people are particularly hard hit by higher energy and food prices,” said DIW president Marcel Fratzscher. According to preliminary data, inflation in Germany in May amounted to 7.9 percent. According to research by his company, rising energy prices are three to four times more likely to affect people on very low incomes than people with high incomes.

Hence, the federal government is responsible and must do “much more” to ease the social hardship of inflation. In his view, the previous aid package was “insufficiently targeted and in some cases even counter-productive”. Because the fuel price brake is a redistribution from poor to rich and counteracts climate protection, Fratzscher explained. In addition, too many people in need, especially pensioners, received almost no support.

According to DIW, low-income families should not only be relieved of the burden on a one-off basis, but permanently, and social benefits should be increased “urgently”. For example, the Hartz IV rate and basic security should be increased by € 100 to € 150 per month.

“It has room for maneuver as tax revenues increase as inflation rises,” said Fratzscher, referring to the federal government. “And we should be aware that the rise in inflation has probably not yet reached its peak. I’m afraid we underestimate the risk of a further escalation of the war and the dangers of another corona wave. ”

FRANKFURT / BERLIN (Dow Jones)

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