Inflation in Germany rose to 2.9% in April as tensions continue over the war in Iran, according to provisional figures from the Federal Statistical Office released on Wednesday.
The US and Israel launched their attacks on Iran on February 28, leading to turmoil on markets worldwide and price increases that have left many struggling, in Germany and beyond.
Energy prices have been soaring, with household energy and fuel costs up 10.1% in April compared to a year ago.
Already in March, German energy prices rose by 7.2% while inflation hit 2.7% overall, the statistics office said.
“In April, inflation rose solely because of higher energy prices,” said Commerzbank’s chief economist Jörg Krämer. “But surveys show that companies are reacting swiftly to the rise in energy costs and will soon be raising prices for other goods and services significantly as well.”
Prices for German consumers rose 0.6% month-on-month from March to April this year.
As high energy costs drive up production and transport costs for businesses, there is considerable concern that prices for food, restaurant meals and services will continue to rise.
In April, the inflation rate for food accelerated slightly to 1.2%, up from the 0.9% in March.
Services such as restaurant visits, which had been the biggest drivers of price rises for many months, became 2.8% more expensive in April compared with the same month last year – less than in recent months.
Economists point to price increases for airline tickets and package holidays as likely contributing factors.
Many cutting back due to prices
Many people are already finding they can barely cover their daily costs and are relying on their savings, polls say. Some 58% of respondents said that they had recently cut back in their daily lives, according to a Forsa poll.
Younger people under 30 and those on lower incomes are particularly likely to be cutting back, the survey commissioned by RTL/ntv found.
Germany’s ‘fuel discount’
The German government is helping drivers by cutting taxes on diesel and petrol by around €0.17 cents gross per litre from May 1 to June 30. Economists say the fuel discount will not lower fuel prices in the long term – and only benefits those who drive vehicles with combustion engines.
Economists expect inflation rate to rise significantly
Even before the Iran war, economists were predicting that Germany’s inflation rate would end up just above the 2% mark this year. But given the conflict, these forecasts no longer apply: Leading economic research institutes now anticipate inflation will average 2.8% this year and 2.9% in 2027.