Inflation in Germany stagnated in April - experts expect an increase

Inflation in Germany stagnated in April - experts expect an increase

The inflation rate in Germany stagnated at 2.2 percent in April compared to the same month last year, as the Federal Statistical Office provisionally reported. Although this is the lowest value since April 2021, economists expect an increase in the next few months due to price planning by many companies and rising wages. This could cause headline inflation to rise back to 3 percent, which could affect consumer purchasing power.

Since April 1st, the regular VAT rate of 19 percent has applied again to natural gas and district heating, after the temporary reduction of 7 percent expired. In April, the decline in household energy prices slowed compared to the previous month. For example, energy prices rose significantly in some federal states, as did the prices for restaurant visits and hotel stays. Food prices rose 0.5 percent year-on-year in April, after falling in March.

Core inflation in Germany was 3.0 percent in April when energy and food prices are excluded. Despite the positive development, the inflation rate is expected to fall to 2.3 percent on average for the year. However, economic research institutes predict a potentially more difficult development than expected as some industries plan higher prices. Consumption could be boosted by lower inflation rates, especially if real wages rise.

The latest data from consumer researchers at GfK in Nuremberg suggests that Germans' spending mood is increasing slightly due to the prospect of rising wages. Private consumption remains an important pillar of the German economy, which has been weakening somewhat for months. Further data on economic development in the first quarter of 2024 will be published by the Federal Statistical Office. It is expected that the inflation rate could rise in the coming months given the positive developments.