Highest inflation since 1993: Inflation rises to 5.3 percent in December

Prices in Germany also rose at the turn of the year.

According to an initial estimate, consumer prices in December were 5.3 percent higher than in the same month last year, as the Federal Statistical Office announced on Thursday.

In November the inflation rate was 5.2 percent.

Based on the European method of calculating the harmonized consumer price index (HICP), the rate for December even comes to 5.7 percent.

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For the year as a whole, consumers had to dig 3.1 percent more into their pockets for everyday items.

In particular, the prices for energy and food rose sharply, as can be seen from the data from the state statistical offices.

In Hesse, for example, the prices for energy rose by a total of 11.5 percent compared to the previous year.

Consumers felt this especially when heating and refueling.

The prices for heating oil rose in Hesse by 43 percent, natural gas was 7 percent more expensive and fuels by 23.7 percent.

Without the increase in energy costs, the Hessian inflation rate in 2021 would have been just 2.1 percent instead of 3.1 percent.

Slight relaxation with energy prices

Food prices rose by 2.7 percent in 2021. Vegetables were 5.5 percent more expensive on average over the year, edible fats and oils were 4.9 percent more expensive. Consumers also had to pay significantly more for other goods: prices for bicycles, for example, rose by 8 percent and those for cars by 4.4 percent. Consumer electronics, on the other hand, only rose moderately by 0.5 percent, and mobile phones were even 3.3 percent cheaper than in 2020. In 2021, consumers also had to pay more for going to the hairdresser or restaurant than in the previous year. On average, services were 2.4 percent more expensive. Rents in Hessen rose by an average of 1.6 percent.

The price increase, which was particularly noticeable in the second half of 2021, was not only driven by special effects such as the expiry of the temporary reduction in VAT or the introduction of the CO2 price. The general price level also rose so strongly because the demand for goods rose again surprisingly quickly after the crisis year 2020. As a result, the prices for crude oil and gas on the international energy markets rose sharply. In addition, the international supply chains are still disrupted. Companies struggle with shortages of important intermediate products and raw materials and pass the rising prices on to consumers. In November, producer prices had risen more sharply than in 70 years.

At least in terms of energy prices, there were signs of a slight relaxation in December. Although they were 22 percent higher in Hesse than a year ago, compared to November 2021, energy was on average 0.9 percent cheaper. The prices for heating oil fell, while natural gas and electricity also rose in December. On the other hand, food became more expensive compared to the previous month: Vegetables and meat in particular cost more.

Inflation rose in December in other major euro area economies as well. In Italy it rose to 4.2 percent year-on-year according to the HICP - the highest level since 2008. While it remained at 3.4 percent in France, it rose 1.2 percent to 6.7 percent in Spain . In a European comparison, the German inflation rate is in the upper mid-range. In November, the euro area average inflation rate was 4.9 percent, with Lithuania at the top (9.3 percent) and Malta at the bottom (2.4 percent). The European statistics agency Eurostat published the figures for December on Friday.

According to economists, inflation in Germany will remain high this year - it could even rise again. The Halle Institute for Economic Research (IWH) and the Kiel Institute for Economic Research (IfW) expect an inflation rate of 3.1 percent for 2022. The Munich Ifo Institute expects an increase to 3.3 percent and the Deutsche Bundesbank is even forecasting 3.6 percent.

The European Central Bank (ECB) also expects a high inflation rate of 3.2 percent for the euro zone this year.

For them, however, that is not a reason to abandon their ultra-relaxed course.

The central bank wants to get out of the bond purchase program PEPP launched as a result of the corona crisis by March.

However, she is still sticking to her old APP purchasing program from times before the pandemic, and an increase in the key interest rate is not planned either.

Other central banks, however, have already increased their interest rates or have announced that they will.