Carsten Brzeski ING Economist
(Carsten Brzeski ING Economist)

German inflation unexpectedly slows

Annual inflation rate in Germany eased to 7.6% in June from 7.9% in May which was the highest reading since German reunification, preliminary data from the Federal Statistical Office (Destatis) showed on Wednesday (June 29). The rate was expected to rise to a new record of 8.0%.
Energy prices rose by 38.0% year on year. Food prices, too, increased above average (+12.7%).

Destatis said significant price increases at the upstream stages in the economic process and issues with the supply chain had an upward effect on prices.

“Special effects such as the impact of the 9-euro ticket and the fuel discount are included in the results.  It is not possible yet on the basis of the provisional results to show the exact extent of these effects” the document read.

The German government launched the EUR 9 monthly ticket for public transport over the three months, starting June 1. Other measures including tax cuts on gasoline and diesel also started to take effect. 

The drop in headline inflation is mainly the result of the government’s energy relief package, ING economist Carsten Brzeski said. “This is not a turning point – yet – but rather evidence that it is currently governments and not central banks that can bring down inflation,”Brzeski added.

On a monthly basis, consumer prices went up by 0.1%, the lowest in seven months. EU harmonised rates also slowed, with the annual one coming in at 8.2% from 8.7% and the monthly one falling to -0.1%, the first decline in the CPI since November of 2020. The final results for June 2022 will be released on 13 July 2022.