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German Inflation Set to Overshoot Again as NRW Reports Sharp Price Jump

Economic Indicators Sep 29, 2022 05:48AM ET
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© Reuters.

By Geoffrey Smith 

Investing.com -- Inflation in the Eurozone's largest economy exceeded expectations yet again in September as the government withdrew temporary subsidies for train travel, while fuel and food costs continued their relentless march higher.

The Federal Statistics Office Destatis said consumer prices rose by 1.9% on the month according to preliminary estimates, well in excess of the 1.3% expected by analysts beforehand. As a result, the annual inflation rate rose to a new all-time high for Germany since its reunification, at 10.0% according to its own national methodology and 10.9% under the EU harmonized one. 

The increase was driven largely by rises in the price of transport, as the federal government ended a scheme of so-called 9-Euro tickets that aimed to offer a cheaper alternative to car transport while gasoline and diesel prices soared earlier in the year.

In a partial breakdown of its estimate, Destatis noted that energy prices in general were up 43.9% from a year earlier, while food prices were up 18.7%, reflecting the devastating impact of Russia's war in Ukraine.

Transportation costs also rose, with individual states recording double-digit percentage rises in vehicle fuel prices as well as a sharp rise in rail ticket prices. 

"High energy and food prices, which are likely to rise further in the coming year, are causing significant losses in purchasing power," said Torsten Schmidt, head of economic research at the RWI think-tank in Essen, one of four institutes that published a joint outlook on the German economy that now sees it contracting by 0.4% next year. Growth this year - which the institutes saw at 2.7% only six months ago - is now estimated at only 1.4%.

The inflation numbers are likely to increase the pressure on the European Central Bank to keep raising interest rates faster and further than it would like. Two members of its governing council - Lithuania's Gediminas Šimkus and Estonia's Madis Müller both indicated in remarks to Bloomberg on Thursday that they were inclining toward another increase of 75 basis points in key rates when the ECB next meets on October 27th. 

Even so, there were signs of a moderation in prices elsewhere in the Eurozone earlier on Thursday. Figures out of Spain earlier showed the annual inflation rate falling by much more than expected to 9.3% (according to the EU method) from 10.5% in August, with prices staying unchanged on the month. Core inflation likewise sank to 6.2%.

 
German Inflation Set to Overshoot Again as NRW Reports Sharp Price Jump
 

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Comments (2)
James Johannsen
James Johannsen Sep 29, 2022 8:07AM ET
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central banks deliberately destroying their currencies.
Cody Hawkins
Cody Hawkins Sep 29, 2022 6:15AM ET
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They really think raising rates is the solution? Or is it because that is all they have to work with? Germany laughed when they were warned about relying on Russian energy years ago. The German people are smart, their leadership is not. Wouldn't be surprised if unrest sparks across Europe, starting with Germany.
Steven ML
Steven ML Sep 29, 2022 6:15AM ET
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most European countries are prepared for the winter and have their gas reserve sorted.
Cody Hawkins
Cody Hawkins Sep 29, 2022 6:15AM ET
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I've seen most countries are around 88% full, which is good. I hope they can last the winter. Won't they still have to cap usage though?
 
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