Germany – Inflation remains stubbornly high
The decline in the inflation rate in Germany has probably come to an end for the time being.
Dr. Ralph Solveen
Commerzbank Economic Research
07/30/2024
At 2.3%, the headline rate in July was actually slightly higher than in June, as was the core inflation rate excluding energy and food, which was unchanged at 2.9% and therefore significantly higher than the ECB wants it to be. This is primarily due to the continued strong inflation in services, where prices are still being pushed up by high wage increases. This is unlikely to change much for the time being, meaning that the core inflation rate will remain well above the ECB's target of 2% in the coming months.
The disinflation process in Germany is proving to be more drawn out than some might have expected. After all, the year-long downward trend in the inflation rate had come to an end in spring. Since then, the inflation rate has been moving sideways at around 2¼%, rising again slightly from 2.2% to 2.3% in July. It is currently still being held down by the frequently volatile prices of food and energy. If these two sub-components are excluded, the core inflation rate was significantly higher at 2.9%, which was unchanged from the month ago.
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