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German Inflation Softens To 31-Month Low

Driven by falling energy prices, Germany’s consumer price inflation softened to the lowest level in just over two-and-a-half years, as initially estimated in January, final data from Destatis showed on Friday.

The consumer price index, or CPI, registered an annual increase of 2.9 percent in January, which was slower than the 3.7 percent rise in December.

That was in line with the flash data published on January 31.

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Further, this was the weakest inflation rate since June 2021, when prices had risen 2.4 percent.

“The price situation for energy products is noticeably easing and the increase in food prices continues to slow,” Destatis President Ruth Brand said.

“It is still above the overall rate of inflation, however”.

Despite the discontinuation of the brake on energy prices and the lifting of price of carbon, energy prices decreased 2.8 percent.

This was the major factor that contributed to the slowdown in overall inflation.

Food price inflation moderated to 3.8 percent from 4.6 percent a month ago. Prices for goods were 2.3 percent more expensive, and those for services grew by 3.4 percent.

Excluding food and energy, core inflation eased somewhat to 3.4 percent from 3.5 percent, as estimated.

Confirming the flash data, Destatis said consumer prices moved up 0.2 percent in January from December.

Inflation, based on the Harmonised Index of Consumer Prices, also slowed to 3.1 percent in January from 3.8 percent a month ago.

Monthly, the EU measure of inflation dropped 0.2 percent. There was no change in the HICP figures compared with the initial estimate.

In the January monthly report, the Bundesbank said inflation is set to decline distinctly at the beginning of the year partly due to the absence of the December base effect.

Earlier in the Winter Forecast, released in December, the ifo Institute projected Germany’s inflation to slow notably to 2.2 percent in 2024 and then to hit 1.8 percent next year.

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