Fuel discount temporarily curbs inflation in Germany to 2.6 percent

Energy prices weaken

Behind the decline is also a significant easing in energy prices. Consumers in Germany had to pay 6.6 percent more for energy products than a year earlier, according to the Wiesbaden statisticians' calculations. In April, however, energy prices had still risen by 10.1 percent, meaning that the price momentum in energy noticeably weakened.

Food prices rose comparatively little in May, by 0.4 percent. Nevertheless, inflation is significantly higher than in February, when the Iran war had not yet had any impact. As recently as April, the oil price shock resulting from the Iran war had pushed the inflation rate to 2.9 percent — the highest level since January 2024.

Risks from the Middle East

Economists are watching further developments with concern. "Wie es mit der Inflation hierzulande weitergeht, hängt nach Einschätzung von Volkswirten entscheidend von der weiteren Entwicklung im Nahen Osten ab", according to one assessment. Given the war in the Gulf, the supply of crude oil and liquefied natural gas could be constrained for an extended period.

The situation at the Strait of Hormuz, which is important for global oil and gas trade, remains fragile. Should the supply of crude oil and liquefied natural gas tighten over a longer period, prices for food and services could rise, as companies pass on higher energy, production, and transportation costs.

Forecast by the Council of Economic Experts

The 'Council of Economic Experts' expects an inflation rate of 3.0 percent for Germany on an annual average. However, it could also reach 3.5 percent, as the federal government's advisory board calculated in its spring report. After the price wave triggered by the Ukraine war, inflation subsided, and Germany's inflation rate stood at a comparatively moderate 2.2 percent in 2025.

Higher inflation rates erode consumers' purchasing power: they can then afford less for one euro. With the expiration of the fuel discount at the end of June, an important price-dampening factor disappears, meaning the inflation development in the coming months will be observed particularly closely.