Sharp rise in prices: inflation in Germany reached 7.4 percent in April

The extraordinarily strong price increase continues.

In April, the inflation rate in Germany reached 7.4 percent, as the Federal Statistical Office announced on Thursday after an initial estimate.

It was 7.3 percent in March and 5.1 percent in February.

Christian Siedenbiedel

Editor in Business.

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Inflation rates of more than 7 percent were last seen in Germany around 40 years ago.

At 7.4 percent, inflation in the European Monetary Union has even reached its highest level since it was founded.

There has been a notable change since March.

Compared to the previous year, energy prices are no longer rising quite as sharply, and in some cases they are even falling slightly compared to the previous month.

In return, the prices for food are increasing all the more.

Above all, those that are affected in some way by the Ukraine war, such as vegetable oil and products made from grain, such as bread.

In both cases, the Ukraine was one of the important producing countries.

The economist Carl Christian von Weizsäcker even thinks it is possible that the officially measured inflation in the food sector is still an understatement, because the shelves in the supermarkets for some of the foods that were particularly affected by the war were empty at times - and price collection was therefore made more difficult.

Some energy prices even fall compared to March

Recently, prices at gas stations were not quite as high as they were around March 10th.

The price for Super E10 fell on average from 2.20 euros to 1.96 euros per liter, while diesel fell from 2.31 euros to 2.02 euros per liter.

Nevertheless, these are still extraordinarily high prices in historical comparison and also in comparison to the previous year.

The price of crude oil, which had shot up to almost $130 a barrel (159 liter barrels) after Russia's attack on Ukraine, has also calmed down somewhat and most recently stood at $105.

Again and again, however, news from the war and the sanctions can drive him up.

The state statistical offices have published slightly more detailed figures on the price development of individual products.

According to economist Holger Schmieding, the figures for North Rhine-Westphalia, which is mostly quite representative, show that the sharp rise in the price of food and, to a lesser extent, of package holidays more than offset the drop in oil prices from their peak in March from the Hamburg banking house Berenberg.

In particular, liquid gas (plus 40 percent), peppers (plus 15.8 percent) and pork (plus 13.9 percent) were more expensive compared to the previous month.

On the other hand, light heating oil (down 18.4 percent), chocolate bars (down 10.7 percent) and diesel fuel (down 9.8 percent) were offered at lower prices.

As a result, food prices are rising significantly

The increase in energy prices compared to the previous year has therefore fallen somewhat since March, from 42.6 to 37.6 percent.

This is mainly due to heating oil, which was 13.8 percent cheaper than in March, so over the year the price “only” rose by 74.1 percent and not by 99.8 percent as in March.

The situation was similar with diesel: the price of fuel fell by 9.8 percent compared to March, which meant a price increase of at least 49.9 percent over the year, but no longer a good 65 percent as in March.

On the other hand, consumers are increasingly feeling the sharp rise in the price of grain and other raw materials used in the food industry.

For food as a whole, the NRW inflation rate rose further from 7.5 percent in March to 10.2 percent in April, partly because meat and meat products now cost 13.8 percent more in April than in the same month last year instead of 5.2 percent in April March.

Within a month, the prices of meat and meat products have skyrocketed by 8.5 percent.

"Unfortunately, the barbecue season will be considerably more expensive than usual," commented economist Schmieding.

The price of bread has now risen by an impressive 10.6 percent compared to the previous year, compared to 7.5 percent in March.

In the case of edible fats and oils, the year-on-year price increase even rose from 19.7 percent in March to 27.7 percent in April.

Tourism also contributed to the slight increase in the NRW inflation rate.

As an expression of supply chain bottlenecks, there is also a noticeable increase in inflation for durable consumer goods.

The inflation rate for this area continued to rise, to 6.8 percent after 6.3 percent in March.

What is the ECB doing in the face of exceptionally high inflation?

So far, the European Central Bank (ECB) has hesitated to take swift action against the high inflation.

The official line is that at the next monetary policy meeting on June 9, based on the data available, a decision will be made to end bond purchases in the third quarter, i.e. the months July to September, and to raise interest rates "some time afterwards".

"Some time later" could mean a week later or a few months later, ECB President Christine Lagarde said.

However, there were now increasing voices from the ECB, not only from individual national governors but also from the Governing Board, who are calling for the first interest rate hike in July.

Then one could obviously interpret the previous communication of the central bank in such a way that the last purchases of new bonds could already be made in June and according to the planned sequence the way for interest rate increases in July is then free.

In any case, the investment bank Goldman Sachs has revised its forecast for further interest rate developments upwards: It now expects the ECB to raise its key interest rates by 0.25 percent as early as July, followed by further interest rate hikes in September and December and four further steps in the coming year 2023