German inflation rises again in December

BERLIN: German inflation rose in December, preliminary data showed Thursday, as the pace of price rises picked up again after months of steady decline.

Consumer prices climbed 3.7 percent year-on-year, up from a reading of 3.2 percent in November, according to the federal statistics agency Destatis.

The last monthly increase in the indicator was recorded in June, and the renewed increase was anticipated by analysts.

“The main reason for the rise in inflation lies in the past,“ said Fritzi Koehler-Geib, chief economist at public lender KfW.

A rise in energy prices in December 2023 as compared with the previous year could be put down to government support for household bills at the end of 2022.

The change “makes today’s energy prices appear higher in comparison, even though they have fallen further in recent months”, Koehler-Geib said.

Energy costs surged after Moscow invaded Ukraine in February 2022 and Russia slashed crucial gas exports -- a hammer blow for German industry.

Price increases peaked towards the end of 2022 and have eased in recent months as economic activity slows and a series of European Central Bank (ECB) interest rate hikes have taken their toll.

Inflation sat at 5.9 percent for the whole of 2023, Destatis said, down from 6.9 percent in 2022, a figure which had not been seen in decades.

The more moderate pace of inflation will bring some relief for consumers and businesses, which had to contend with rapid increases in prices for energy and then food.

In comparison with 2020, consumers paid on average 30 percent more for food over the recent festive period, according to the Cologne Institute for the German Economy (IW).

The cost of potato salad, a staple of the German Christmas menu, increased by 4.7 percent between 2022 and 2023, the IW estimated.

The inflation indicator remains above the ECB’s two-percent target. The Frankfurt-based institution has warned recently that the fight against inflation is not over.

“For the ECB, this reacceleration of inflation strengthens the stance of keeping a very steady hand and not rushing into any rate cut decisions,“ said Carsten Brzeski, head of macro at ING bank. -AFP