Status: 03/30/2023 3:03 pm
The inflation rate dropped to 7.4% in March. Inflation slowed down significantly. The rise in energy prices, in particular, has slowed.
Lower gasoline and heating oil prices are pushing inflation in Germany to its lowest level since August 2022. Goods and services cost an average of 7.4 percent more in March than a year earlier, according to an initial estimate by the Federal Statistical Office. In January and February, inflation was still 8.7%. From February to March, prices rose by 0.8%.
“That’s good news,” said Jörg Zeuner, chief economist at Union Investment. Sebastion Dullien of the IMK Institute, who is close to the union, also sees this as a good sign: “This should be the first step towards a sustained downward trend in inflation rates in Germany. now be expected in the coming months.”
“Food is getting more expensive, life is still expensive”
However, there was bad news for consumers, as food remains the main price driver. They rose by an average of 22.3% from March 2022. This means that prices rose even more than in February, when inflation was 21.8%. “This is mainly due to the fact that vegetables have apparently become scarce due to crop failures in some supplying countries,” said Berenberg Bank chief economist Holger Schmieding.
“Eating is getting more expensive, traveling is getting more expensive, living is still expensive,” judged LBBW’s Jens-Oliver Niklasch. With this, consumers would not feel immediate relief, as non-energy products would also remain expensive.
Core inflation rises
The reason for this is the stubbornly high core inflation, which takes into account the sharp fluctuation in energy and food prices. It is seen as a sign that inflation is increasingly affecting the economy. According to current Commerzbank figures, it even rose in March, from 5.7 to 5.9 percent. In March, for example, tourist packages in Bavaria were 12.8% more expensive than in the previous year.
Experts think inflation has peaked
In March of this year, energy cost only 3.5% more than a year ago, against 19.1% in February. However, this is not due to falling prices, but to a more favorable base effect: a year ago, energy prices soared after the Russian invasion of Ukraine. Now, for the first time, they are compared with already increased prices, no longer with the lowest pre-war prices – this is called the base effect.
“This is still not clear for the ECB,” said economist Schmieding in view of today’s numbers. According to ECB director Isabel Schnabel, core inflation is proving to be much more resilient than headline inflation. “And of course this causes some headaches for central bankers as well,” she noted.
However, most experts now believe that inflation has peaked. Economists expect an average annual inflation rate of 6.6 percent, after 6.9 percent last year. Only in 2024 is it likely to drop noticeably to 3.0%.
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03/30/2023 2:44 pm