As of: January 31, 2024, 3:08 p.m
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Cash is used to shop at a market stall: food prices rose by 3.8 percent.
© Sina Schuldt/dpa
Inflation in Germany weakened significantly at the beginning of the year.
But the battle against inflation is not yet won, according to economists.
Wiesbaden - Inflation in Germany is on the decline.
According to preliminary data, the inflation rate in January was 2.9 percent.
It was the lowest value since June 2021 at 2.4 percent, as the Federal Statistical Office announced.
In December 2023, consumer prices had risen by 3.7 percent compared to the same month last year.
Economists expect a further decline over the course of the year.
However, the pace could slow down.
Friedrich Heinemann, economist at the ZEW economic research institute, spoke of a “good start to 2024 for more price stability”.
With the return to the regular VAT rate in the catering industry and routine price adjustments at the beginning of the year, there were certainly some stress factors.
Despite the increase in the CO2 price in January, energy cost 2.8 percent less than a year earlier.
Food prices rose by 3.8 percent.
The price increase continued to weaken here - after an increase of 4.5 percent in December and 5.5 percent in November.
Economists expect further decline
Economists expect the inflation rate to fall further this year.
However, according to data from the Munich Ifo Institute, more consumer-related companies want to increase their prices.
“Inflation is therefore only likely to fall slowly in the coming months,” predicted Ifo economics chief Timo Wollmershäuser.
According to the companies surveyed, the prices of food and beverages are likely to increase somewhat more.
Restaurants and hotel stays are likely to become more expensive.
The price pressure on clothing retailers, however, has eased somewhat.
According to the Ifo survey, tour operators are also planning slightly fewer price increases than in December.
According to preliminary data from the Federal Office, consumer prices rose by 0.2 percent in January compared to the previous month.
The fight against inflation has not been won
Commerzbank chief economist Jörg Krämer warned: “The fight against inflation is not yet won.”
In his opinion, the European Central Bank (ECB) should resist the temptation to cut its key interest rates too early.
The central bank is aiming for stable prices with 2.0 percent inflation for the euro area as a whole in the medium term.
In order to curb inflation, the monetary authorities have raised key interest rates ten times in a row since the summer of 2022.
Higher interest rates make loans more expensive, which can slow down demand and counteract high inflation rates.
However, more expensive loans are a burden for the economy because loan-financed investments become more expensive.
According to ECB Vice President Luis de Guindos, inflation in the euro area could fall faster than the central bank expected in December.
There have been “more positive surprises” in inflation recently, de Guindos told the weekly newspaper “Die Zeit” when asked when the ECB target of two percent would be reached: “My personal assessment is that it is somewhat lower more than we last predicted.”
In December, the ECB forecast an inflation rate of 2.7 percent for this year.
At the time, the central bank expected a rate of 2.1 percent for 2025.
The ECB will publish its next forecast in March.
Inflation puts a strain on consumers
Higher inflation rates reduce the purchasing power of consumers.
You can then afford one euro less.
The burden on people caused by inflation was also comparatively high last year.
The annual average rate was 5.9 percent, lower than in 2022 when it was 6.9 percent.
But it was still the second highest annual figure since reunification.
After the Russian war of aggression against Ukraine began in February 2022, energy and food prices in particular rose sharply, driving up inflation overall.
dpa