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For the third time in a row: Eurozone inflation weakens again


Prices in the euro zone climbed 8.5 percent in January compared to the same month last year – and thus more slowly than feared. A glimmer of hope for consumers in Germany: butter is becoming cheaper.

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Passers-by in front of a department store in Paris: prices are rising more slowly


© Charles Platiau / Reuters/ Reuters

The high level of inflation in the eurozone eased further at the beginning of the year.

Consumer prices rose by 8.5 percent in January compared to the same month last year, according to an initial estimate by the statistics office Eurostat.

Analysts had expected an inflation rate of 8.9 percent.

In a month-on-month comparison, prices fell by 0.4 percent in January.

With the decline in January, inflation has eased for the third month in a row.

In December, the inflation rate was 9.2 percent.

A record value of 10.6 percent was reached last October.

Core inflation, which excludes volatile energy and food prices, held steady at 5.2 percent in January, unchanged from the month before.

Core inflation is thus still at its highest level since the introduction of the euro and shows that the strong price increases are not only affecting energy and raw materials.

Economists attach particular importance to core inflation because it reflects the pass-through of costs from businesses to consumers.

This can result in second-round effects in the form of higher wage demands, which can ultimately lead to a price-wage spiral.

Energy prices continue to rise the most, albeit more slowly than in the previous months.

On the other hand, food prices increased at the beginning of the year.

The price target of the European Central Bank (ECB) of two percent in the medium term continues to be clearly exceeded.

Before the turn of the year, the central bank had slowed down its high pace of interest rate hikes to just 0.50 percentage points.

At the interest rate meeting on Thursday, the financial markets are also firmly expecting a further interest rate hike of 0.50 percentage points in order to get the high inflation under control.

A glimmer of hope for consumers: butter prices are falling

In Germany, the Federal Statistical Office had postponed the publication of data on German inflation in January, which was planned for Tuesday, at short notice.

The notification could not be published on the planned date due to a technical problem in the data preparation, the office said.

Economists expect that the burden of rising prices has increased significantly.

However, there is at least a glimmer of hope for consumers: the prices for a popular product are slipping across the board in this country.

Butter is getting cheaper.

The discounters Aldi and Norma, but also the grocery store Kaufland, lowered the prices for the 250-gram pack of branded butter in the entry-level price range significantly on Wednesday: from 1.99 to 1.59 euros.

Germany's largest food retailer, Edeka, has already announced that it will reduce the price of its "Good & Cheap" butter by the same amount.

Important for consumers: These are not special offers, but the new normal price.

At the peak of the price wave in May, the butter package cost 2.29 euros.

Butter from brand manufacturers has also become cheaper in many cases.

It should only be a matter of time before the rest of the trade follows the price reduction of the pioneers by around 20 percent.

This is because butter is considered a basic price item that customers use to orientate themselves when perceiving a retailer's price.

The fact that butter prices are falling right now is due to the rhythm of price negotiations in the dairy industry.

The old contracts expired at the end of January, and in the new contracts the dealers were able to agree on significantly lower prices, which make the current price reductions possible.

One reason for this is that after the record milk prices achieved last year, raw milk production in Germany has increased noticeably again, said the general manager of the dairy industry association, Eckhard Heuser, of the dpa news agency.

As a result, there was again a slight oversupply and prices came under pressure.

The new contracts have a term of four weeks.

However, the industry expert does not expect new price increases after the end of the term.


Source: spiegel

All business articles on 2023-02-01

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