Inflation in June: Inflation has dropped surprisingly

Status: 06/29/2022 15:00

Inflation in Germany unexpectedly weakened in June. Goods and services increased by 7.6 percent. This fuels hopes that inflation has already peaked.

Consumer prices in Germany have not increased as much as expected this month. According to preliminary estimates by the Federal Statistical Office, goods and services in Germany cost an average of 7.6 percent more in June than a year earlier. According to a survey by the Reuters news agency, economists expected the inflation rate to rise to 8.0 percent in June. Inflation in May was 7.9%, the highest level since the winter of 1973/1974.

According to experts from the Landesbank Hessen-Thüringen (Helaba), “inflation in Germany has probably peaked”. However, not all experts share this assessment. For example, chief economist at asset management firm HG Trust, Michael Heise, does not expect inflation to peak until September.

Are the fuel discount and the 9 euro ticket effective?

Experts indicate gasoline prices as the reason for the fall in June’s inflation, which fell in June, among others. thanks to a discount on fuel. According to economists, a ticket for 9 euros could also have a special effect.

The Federal Statistical Office stated that the exact results of these policies could not yet be demonstrated with preliminary results. These effects will be discussed in more detail with the publication of the final results on July 13.

Despite the 9 Euro discount on fuel and the ticket, energy costs were once again the strongest driver of overall inflation in June. Energy prices increased by 38%. compared to the same month last year, so to a similar extent as last year. Food prices also rose at an above-average 12.7% pace.

The ECB aims to change interest rates

Lower than expected German inflation should ease the pressure of the European Central Bank on rapid and significant interest rate hikes. Recently, at the next meeting of the Council in July, the ECB signaled that it would initiate a change in interest rates and end the zero interest rate policy. Most economists expect the key interest rate in the euro area to rise from 0% to 0.25%.

However, the head of the Lithuanian central bank Gediminas Simkus has now opted for a significant increase in interest rates by 0.5 percentage point. as an option for an interest rate decision in July.

Perceived inflation rate of almost 18 percent

Meanwhile, consumers perceive prices have risen much more than official inflation statistics show. This is the result of a survey conducted by DekaBank. The perceived rate of inflation is now almost 18 percent, said DekaBank chief economist Ulrich Kater.

“This is a drag on the economy,” commented Kater on the sharp rise in prices. “The trust of consumers has been trusted.” Many households would already have to resort to savings to make ends meet. “The savings rate is already falling.” Inflation threatens all areas of the economy.

Low-income people are already coping with the price increases

Low-income households are already significantly reducing their consumer behavior due to inflation, according to a study by the union-related Hans Böckler Foundation. About 52 percent of households with a net monthly income of up to € 2,000 have already given up on various groceries and luxury goods. When it comes to shoes and clothing, 63 percent. he even wants to limit, of which almost half say “significantly”.

At the same time, the study shows that the pressure to limit everyday goods affects the whole of society. Across all income groups, 39 percent of the workforce wanted to buy fewer food and luxury items in the future, ten percent of which were “much less.” When it comes to clothing and shoes, 53 percent. wants to limit itself, 18 percent of them “significantly”.

Federal Chancellor Olaf Scholz wants to discuss with leading workers and employers’ representatives in a so-called action agreed on July 4 how price changes can be brought under control.

In recent years, the overall development of consumer prices has also played an important role in collective bargaining rounds in several sectors. Unions rely on high wage increases to counterbalance the inflation rate and, if possible, to protect workers from large real wage losses. On the other hand, economists have been struggling with a wage-price spiral for some time, in which high wage increases can further fuel inflation.

Inflation in Germany drops in June

Ursula Mayer, HR, 6/29/2022 2:43 PM

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