Germany: Purchasing power measures bring down inflation

Inflation slowed in June in Germany thanks to the purchasing power measures decided by the government in the field of transport, but remains at a historically high level, according to provisional official figures published on Wednesday.

The rise in prices reached 7.6% over one year, or 0.3 points less compared to the record value of May, detailed the statistical institute Destatis in a press release.

It is lower than the forecasts of Factset analysts, who expected a price increase of 8.1%.

The harmonized price index, which serves as a reference at European level, also fell slightly, to 8.2%, but remains very far from the medium-term objective of 2% of the ECB.

Over one month, prices were almost stable, at 0.1%.

This is the first slowdown in inflation since January in Germany.

This drop is explained in particular by the temporary measures put in place by the government to reduce the energy bill of households, according to Destatis.

Lower taxes

In June, the country introduced an exceptional reduction in fuel tax and a ticket at 9 euros per month valid on all public transport, excluding high-speed lines.

These measures have ‘reduced year-on-year inflation in June by 0.3 and 0.8 points respectively, according to Salomon Fiedler, analyst for investment bank Beremberg.

‘This is proof that it is currently governments and not central banks that can lower inflation,’ commented Carsten Brzeski, analyst for ING Direct.

The surge in energy prices, caused by the war in Ukraine, thus slowed slightly, to 38.0%, against 38.3% in May.

Food prices, on the other hand, continued to soar, again under the effect of the war, to 12.7% in June, against 11.1% in May.

Goods prices also climbed 14.0% in June, slightly more than in May, due to persistent shortages of raw materials.

The explosion in prices, which is affecting all of Europe, prompted the ECB to decide to raise rates in July, for the first time in 11 years.

The institute will go ‘as far as necessary’ to fight inflation, which should remain so ‘for some time to come’ in the euro zone, President Christine Lagarde said on Tuesday at the institute’s annual seminar in the south of the Portugal.

/ATS

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