Prices through the roof: How Germans are suffering from inflation!

Prices through the roof: How Germans are suffering from inflation!

Since 2021, the prices for food and services in Germany have risen sharply. While butter often costs three euros and two scoops of ice cream require at least four euros, you have to budget over seven euros for a kebab. These price increases are part of a broader inflation phenomenon that peaked at a peak of 8.8 percent in October and November 2022. Overall, prices have risen by almost 20 percent since 2021, which has a significant impact on consumers' wallets.

However, surveys show that many people, particularly those on low incomes and supporters of fringe political parties, often overestimate inflation. In 2024, 15.3 percent of respondents said they expected inflation to be 15.3 percent, while the actual figure was only 2.2 percent. Despite this discrepancy, there has been a 24 percent increase in take-home pay since 2021, partially offsetting the impact of inflation.

Development of wages and cost of living

The general minimum wage was increased from 9.82 euros to 12 euros in 2022, which represents an increase of 30 percent. These measures primarily benefit low-income earners, who are disproportionately affected by the price increase. Families with a net income between 2,000 and 2,600 euros in particular experienced the highest inflation rate of 19.3 percent. In contrast, people living alone with a high net income of over 5,000 euros had the lowest inflation rate of 17.1 percent.

Despite the high wage increases, the reality remains bleak for many workers. There have been no real wage increases in the last five years, and forecasts for 2025 indicate possible real wage declines due to rising social security contributions. The real wage index, which measures the development of earnings in comparison to the development of prices, illustrates this problem. A positive rate of change means that earnings have increased more than consumer prices; a negative rate of change indicates the opposite.

Analysis of purchasing power

The nominal wage index, which records the change in average gross monthly earnings, and the consumer price index, which documents price changes, play a crucial role in calculating the real wage index. The formula for the calculation is: Real wage index = nominal wage index / consumer price index * 100. With this calculation, analysts can understand the loss of purchasing power of employees in Germany, especially in times of rising living costs.

The extensive research and various data available illustrate how price increases and wage trends interact and what impact they have on the average consumer. While the economy is showing some positive developments, the challenge remains to stabilize the cost of living and secure the real purchasing power of citizens.