Inflation in Germany made another significant leap in March: As the Federal Statistical Office announced on Wednesday after an initial estimate, consumer prices rose by 7.3 percent compared to the same month last year.

That was significantly more than in February with an inflation rate of 5.1 percent.

Christian Siedenbiedel

Editor in Business.

  • Follow I follow

The March inflation rate is also so interesting because now, for the first time, the consequences of the Ukraine war have been included in the inflation rate on a larger scale.

The war hardly played a role for the February inflation rate because the inflation data are collected with a certain time lag.

Bread is 7 percent more expensive

Consumers felt the rise in petrol prices and the changes in the supermarket particularly badly - many will only really notice the higher heating costs when they get their heating bills.

At the gas station in March, you often paid significantly more than 2 euros per liter of petrol or diesel.

The cartel office is still to clarify to what extent the mineral oil companies were also involved.

More details on the prices of individual products are provided by figures from the state statistical offices, for example from North Rhine-Westphalia, which are usually very close to the national figures.

The price increase for heating oil was particularly drastic.

The price had already climbed to historic highs before the Ukraine war, but at the end of February it got even worse.

Now it turns out that the price increase compared to the previous year was 99.8 percent in March, which is practically a doubling of the price.

In February, the increase compared to the same month last year was still 37.7 percent.

The increase in the price of petrol and diesel was 49.1 percent, an increase of almost half.

Gas for consumers has also become significantly more expensive, the price increase was 30.1 percent, compared to 21.8 percent in February.

But it is also becoming more and more violent in some cases when it comes to food.

On average, they increased in price by 7.5 percent.

Edible fats and vegetable oils became noticeably more expensive with an increase of 19.7 percent.

After all, Ukraine is a major producer of vegetable oil.

Some supermarkets have already run out of oil, and in some shops the levy has been limited to one or two bottles per household.

Restaurants are also feeling the effects of high oil prices when it comes to the production of French fries.

Vegetables also became significantly more expensive, by an average of 14.2 percent compared to the same month last year.

Bread and cereal products rose 7.1 percent from 5.9 percent in February.

Gas and electricity prices are likely to continue to rise

"In the case of gas and electricity, the pressure could increase a little, since the prices for consumers are only being adjusted gradually," said Holger Schmieding, chief economist at the Hamburg banking house Berenberg.

"Even for food, the rate can still rise, since the prices for grain and other raw materials are only included in the prices for finished food with a time lag." Inflation is likely to remain high until the summer, the economist said, even if it peaks in April could.

"This is another unpleasant surprise for the ECB," said Schmieding.

"But she probably won't change the outlook for her policy." If the economy picks up again in early summer, the ECB will end its bond purchases in the third quarter in order to raise its key interest rates by 2 basis points again for the first time in December, says Schmieding.

Economist Volker Wieland said that double-digit inflation rates for Germany could not be ruled out if the Ukraine conflict escalated further.

DIW economist Marcel Fratzscher thought 10 percent inflation was possible in such a case.

"But double-digit inflation rates would of course be a strong thing," says Wieland.

The German Council of Economic Experts is now forecasting inflation of 6.1 percent on average for 2022 and 3.4 percent for the coming year.

Even the ECB now considers inflation rates of 7 percent possible for the euro area in a less favorable scenario.

Meanwhile, savings banks expressed concern about the impact of high inflation.

"Financial assets will be devalued, purchasing power will continue to decrease," warned Beate Läsch-Weber from the Savings Banks Association in Rhineland-Palatinate.

Inflation hits people with low incomes particularly hard and endangers the economic recovery after the corona pandemic due to the risk of a wage-price spiral.

In addition, inflation and low interest rates would gradually devalue the deposits of savers.

Austria's head of the central bank, Robert Holzmann, meanwhile believes that the European Central Bank could raise interest rates as early as late summer.

"If there are no more new purchases of securities in July, the first interest rate step could be taken in September," he said in Vienna on Wednesday.

When inflation rises, the central bank's job is to raise interest rates.