Skyrocketing Inflation Pushes Cost of Food Up by 2.2 Percent

In August, consumer prices in Germany rose by 2.2% compared to the same month last year, according to preliminary figures from the Federal Statistical Office. This is a slight decrease from the 2.7% increase recorded in July, and a significant drop from the soaring inflation rates of 6.9% in 2022 and 5.9% in 2023, which were largely attributed to the increase in energy and food prices following Russia's invasion of Ukraine.

The inflation rate for June and July was 2.0% each. However, the base effect that drives up the current inflation rate is a result of energy prices having fallen much more significantly in August of the previous year. Consequently, energy prices were 2.4% cheaper in August compared to the previous year.

Despite the decrease in energy prices, food prices continued to rise, with people in Germany having to pay 2.5% more for food in August compared to a year ago. Food prices had increased by 2.2% in July and were even 3.0% in March.

One reason for the increased prices for services is the rising wages. In the second quarter of 2022, the companies or organizations with the highest wages in Germany were primarily in the finance and insurance sector, with average gross monthly salaries around €5,841. This was followed by the information and communication sector, as well as freelance, scientific, and technical services, all significantly above the national average monthly salary of about €4,634 for full-time employees.

However, the higher inflation rate has a negative impact on the purchasing power of people. Unusually high inflation in services, including hotel stays, car repairs, and insurance, has decreased in recent months but did not continue to decline in August. Economists predict inflation rates above the two-percent mark for the coming months.

Despite these predictions, many economists do not expect the ECB to further lower interest rates in the euro area in September due to the price increase in August. The European Central Bank sees its target of stable prices and a stable currency fulfilled with medium-term inflation of 2.0%.

Despite the overall inflation rate easing to 2.2% in August, it still represents a real wage increase of 1.9% compared to the previous year. This is a positive sign for workers, but the continued rise in food prices and the predicted inflation rates for the coming months remain concerning for consumers.