German inflation is projected to drop to its lowest level in almost three and a half years this August, driven mainly by falling energy prices.
Economists predict that inflation in Germany will fall to its lowest level since April 2021 in August. According to a survey published by Reuters on Monday, August 26, involving economists from twelve banks, consumer prices are expected to rise by an average of 2.1% compared to the same month last year. This would mark a decrease from July’s inflation rate of 2.3% and June’s rate of 2.2%. The Federal Statistical Office plans to release a preliminary estimate for August on Thursday.
“A significant relief comes from energy prices,” highlighted the economists from Landesbank Hessen-Thüringen (Helaba) concerning the recent developments. “Gasoline, diesel, and heating oil were cheaper in August than before.” According to the automotive club ADAC, the price of gasoline recently dropped to its lowest point of the year.
However, most experts are not yet ready to declare an end to inflation concerns. “High wage agreements continue to drive up service prices,” noted Helaba. Many businesses are attempting to pass on increased personnel costs to their customers. As a result, service prices rose by 3.9% in July compared to the previous year, an above-average increase.
The increase in selling prices within the German economy accelerated in August, marking the sharpest rise in six months, as discovered by the analysis firm S&P Global in its survey of hundreds of companies.
“This was due to the fact that service providers raised their prices slightly more than before,” explained the report.
The European Central Bank (ECB) has set an inflation target of 2% for the eurozone, a goal that is now within reach again. Speculation is growing in financial markets about a potential interest rate cut in September. The ECB had already begun lowering interest rates in June, reducing the rate from a record high of 4.50% to 4.25%. The bank has stated that its future course will depend on the evolving economic data.
