Inflation rate in Germany falls to 2.3 percent – Fuel discount and oil price push prices down

However, oil and fuel prices are already climbing again: for the first time since mid-May, diesel cost more than 2 euros per liter on Thursday in the national daily average, at 2.012 euros, as the ADAC reported. That was 4.2 cents more than on Wednesday. Looking back to the beginning of the week – before the recent escalation – this represents an increase of 6.2 cents.

Food: eggs expensive, butter cheap

This escalation refers to the conflict situation in the Persian Gulf: following the recent military escalation between the United States and Iran in the dispute over the Strait of Hormuz, oil prices have since risen again. The conflict situation in the Persian Gulf also poses further risks for price developments in the coming months.

Price increases in food were below average in June, at 0.4 percent, as was the case in May. Within a year, prices rose most notably for eggs (+14.6 percent), sugar, jam, honey and other confectionery (+4.8 percent), fish, fish products and seafood (+3.3 percent), and meat and meat products (+2.4 percent). Edible fats and cooking oils (-14.7 percent) and dairy products (-6.2 percent) became cheaper. Particularly notable were price declines for butter (-29.1 percent) and potatoes (-8.8 percent).

Services and rents remain price drivers

Price pressure also remains noticeable in the services sector: services, which include restaurant visits and travel, became 3.1 percent more expensive in June, as in the previous month. At social facilities (+6.8 percent), car repair shops (+4.8 percent) and hairdressers (+4.2 percent), customers had to pay higher prices. At 1.9 percent, net cold rents remained below the general rate of price increase, however.

Outlook: risks from oil, fertilizer and ECB rate reversal

The so-called core inflation – that is, the price trend excluding energy and food – was put at 2.5 percent by the Federal Office, and is thus above the overall rate of inflation. Economist Stefanie Schoenwald of the development bank KfW warned: „Die hohen Düngerpreise der letzten Wochen und der sich abzeichnende gravierende El Nino dürften Wirkung zeigen." This means that the favorable trend in food prices could soon be over.

In the current month, prices could rise more sharply again due to the expiration of the fuel tax discount, economists warn. Since inflation in the eurozone surged sharply with the oil price shock, the ECB raised its key interest rates in June for the first time in almost three years. The central bank expects to reach its 2 percent price target again only in 2028.