Inflation moderates in Germany for the second consecutive month and gives oxygen to the ECB |  Economy

Inflation moderates in Germany for the second consecutive month and gives oxygen to the ECB | Economy

Prices gave the German economy a breather in the final stretch of 2022. Inflation moderated for the second consecutive month and stood at 8.6%, according to the Federal Statistics Office (Destatis). For now, this drop means leaving double digits behind, since in November the rate was still 10%. The decline, which occurs after the sharp drop in the CPI in Spain, gives oxygen to the European Central Bank (ECB), which must meet again on February 2 to decide on another possible rise in interest rates, now at 2.5%.

German inflation has chained two months of declines, after reaching a level of 10.4% last October, the highest in seven decades. In any case, the annual average will be equally high, 7.9%, according to Destatis. And to find a similar value, you have to go back exactly to 1951, when an inflation rate of 7.6% was recorded in the then Federal Republic of Germany. In harmonized terms, inflation receded from 11.3% to 9.6%.

“Since the beginning of the war in Ukraine, energy and food prices in particular have risen sharply and have a significant impact on the inflation rate,” Destatis acknowledged. For this reason, the German Government launched a package of measures to alleviate the burden of companies and consumers with multimillion-dollar aid and curbing the prices of electricity and gas, which erode their purchasing power.

Economists estimate that these measures will curb the rise in inflation in 2023, despite the fact that drastic price relief is not in sight: “Inflation is high and will only come down gradually,” Bundesbank President Joachim Nagel recently declared.

In any case, economists were betting on a much lower relaxation, of 9.1%. Data published by some federal states suggest that the decline has been caused by falling energy prices. In North Rhine-Westphalia, the most populous state, the inflation rate was still 10.4% in December. Energy prices fell, in some cases significantly. The price of gas, for example, fell by 24.3%. On the other hand, that of food continued to rise.

According to Commerzbank chief economist Jörg Krämer, the rate drop in December was also caused by government intervention. “The sharp fall in inflation is mainly due to the fact that the federal Executive took over the discounts for natural gas and district heating in December. Statisticians interpreted this as having had a moderating effect on the prices of households that had directly signed a contract with a provider and were therefore directly relieved in December,” Krämer said in an analysis released by the bank. .

According to Commerzbank estimates, the government action lowered the price rise by around 1.2 percentage points. Without government help in December, inflation would have been 9.8%, only slightly lower than in November. According to Krämer, the slight increase in core inflation, excluding energy and food, from 5.0% to 5.1%, shows “that there is no real easing to speak of”.

Rate hikes

The European Central Bank (ECB) has been trying to curb inflation in the euro area with interest rate hikes since the summer of 2022. After four consecutive increases in the last year, up to 2.5%, the ECB still does not see the end of its efforts to combat record inflation, as ECB President Christine Lagarde made clear after the last meeting of the central bank. in 2022, in mid-December: “We have a long way to go.” The markets interpreted that the rates could reach 4%.

The economic locomotive of Europe, however, continues to offer positive statistics that may lead the ECB to continue with its strategy of cooling activity in order to moderate inflation more vigorously. On Monday, the Federal Employment Agency announced that the number of unemployed in the country had dropped significantly in 2022, despite inflation and the energy crisis. The number of unemployed in Germany dropped significantly in the last year. Compared to 2021, it fell by 195,000 people, according to the agency. The unemployment rate fell by 0.4 percentage points to 5.3%.

THE COUNTRY of the morning

Wake up with the analysis of the day by Berna González Harbor


Read Original Source Here…

Scroll to Top