Not so long ago it was the other way around: even before inflation rates kept rising in Europe, they had already reached surprising heights in the United States.

At that time there were even economists who believed that Europe would be spared such inflation rates as in America;

among other things, because the state spending programs in this country are not as large as in America.

Christian Siedenbiedel

Editor in Business.

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In the meantime, however, inflation in America seems to be calming down again: The American inflation rate has now fallen for the third month in a row, to 8.2 percent in September.

It didn't even get into double digits.

In Europe and especially in Germany, however, it continues to rise and in September it was 10 percent for the first time in a very long time.

What's going on there?

Differences in the roots of inflation

If you talk to economists about the difference in development on both sides of the Atlantic, then in addition to all the differences in calculation, two arguments keep popping up: On the one hand, America can generate more energy in its own country.

Oil, and above all gas, has to be imported less, which provides some protection against price increases.

On the other hand, inflation in the United States is said to have had a different character from the start and was more dependent on demand effects, while in Germany it is mainly the supply side that has contributed to the price increases.

Not only, but particularly strong.

The strong dollar has probably also moderated inflation in America via import prices, which has also exacerbated it in Europe.

ECB President Christine Lagarde recently described it this way: Firstly, energy is the key driver of inflation in Europe.

The prices for electricity, gas and fuel made up 60 percent of the inflation drivers in the euro area.

"In America, it's half of that." Second, wages in America have risen significantly more.

The wage increase there is 5 to 7 percent, in the euro area the collective wages have so far increased less.

There are also differences with regard to the question of whether inflation is driven more by supply or demand.

"Our inflation is very supply-driven," Lagarde said.

Supply bottlenecks and supply chain disruptions would have caused prices to rise.

"In America, inflation is more demand-driven."

Effects of the economic downturn

This obviously also has consequences for the question of whether inflation is currently rising – or falling.

"In the United States we are in a cyclical downturn, a classic cycle in which demand is now falling," says economist Cyrus de la Rubia of Hamburg Commercial Bank.

"In Europe, it's mainly a downturn triggered by supply shocks - supply chains, availability of raw materials." That's driving prices, or it's taking longer for them to go down.

A turnaround in prices in the euro zone is therefore not to be expected before the turn of the year, believes de la Rubia.

"The decline in US inflation compared to the previous year is the result of recent falling energy and gasoline prices," says Stefan Schneider, Germany's chief economist at Deutsche Bank.

Thanks to domestic production, energy prices in the United States rose by around 25 percent over the year, more moderately than in Germany at 43.9 percent.

At the moment, however, the underlying inflationary pressure in the United States is higher than in Germany, also because of strong wage increases.

In view of the current wage demands, however, Germany could soon “catch up” here.

"The US inflation rate is falling mainly because gasoline has become cheaper," said Jörg Krämer, chief economist at Commerzbank.

In addition, the prices for gas and electricity in the United States have not risen as massively as in Germany.

But apart from energy, consumer prices in the United States have risen sharply until recently - also because of rising rents.

It should remain so for the time being because the US labor market is tight and labor costs are rising rapidly.

"Since workers are also scarce in Germany, wages in this country are also likely to increase more strongly, and the recent high wage demands fit the picture," said Krämer.

In terms of underlying inflation, the differences between the United States and Germany are smaller than many suspect.

Different impacts from the Ukraine war

"When it comes to oil, the USA is just as affected as Europe, since the prices hardly differ," says the Frankfurt economics professor Volker Wieland.

This is different with natural gas, since the supply is largely tied to pipelines.

"Accordingly, the USA and Canada continue to have little increased gas prices," says Wieland.

Europe pays a multiple of that.

The Ukraine war and Russia sanctions play an important role here.

In addition, the American central bank, the Federal Reserve, has reacted more decisively to inflation than the European Central Bank, says Wieland, so that one can probably see an initial reaction of inflation expectations to the central bank course in the United States.

"By the way, internationally active energy-intensive companies are in the process of relocating production to North America if possible," says Wieland: "This will also increasingly affect new investments."