Energy prices provide a surge in inflation

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By RockedBuzz 3 Min Read

Cash from the ATM: Now comes the big inflation IMAGO / Gottfried Czepluch To According to the Federal Statistical Office, consumer prices in Germany rose by 3.8 percent in July compared to the same month last year. The inflation rate rose by leaps and bounds – in June 2021 the plus was still at 2.3 percent located. The increase does not come unexpectedly: In July 2000 the temporary lowering of the VAT rates ensured for a lower price level. This has “now had an increasing effect on the price development of many goods and services and thus on the overall inflation rate”, writes Destatis.

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The prices for goods rose above average by 5.4 percent. In this category, the prices for energy products particularly stood out. In July 2021 they were around 11, 6 percent higher. The CO2 levy introduced at the beginning of the year and the current rise in energy prices contributed to this development. The prices for heating oil and fuels would have increased by just under 20 Percent or just under 25 Percent increased.

Food prices also rose above average by 4.3 percent compared to the previous year. For example, consumers had to spend 7.2 percent more on vegetables than in July 2020. Fashion (plus 6.2 percent) and vehicles (plus 5.2 percent) are also among the inflation drivers. After all: Cell phones were 2.9 percent cheaper.

Temporary price increases Economists assume that inflation will not stay at this high level over the long term. Marcel Fratzscher, President of the German Institute for Economic Research, dampens worries about high inflation: “Too low inflation would be a greater risk than too high inflation,” he wrote at the end of July on the occasion of the publication of the preliminary inflation data. Increased inflation is a “luxury problem for Germany”.

The German economy is also struggling with the rise in prices. According to a survey by the employer-related institute of the German economy among 2000 companies, expect 80 Percentage of German companies medium or strongly rising prices. The reason: raw materials have become more expensive and intermediate inputs are scarce. 70 Percent of the companies surveyed also reported rising energy prices. Around every second company stated that they could pass on the higher prices. That also drives inflation.

The IW economists assume that the problems on the supply side are mainly the consequences of the pandemic, which should be resolved by the end of the year. Until then, further price increases are possible. As soon as the many special effects have been processed, the IW expects normalization, according to IW economist Matthias Diermeier.

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