National economy Inflation in Germany rises again slightly in July

Inflation in Germany is rising again slightly. In July, consumer prices were 2.3 percent higher than in the same month last year, as announced by the Federal Statistical Office on Tuesday.

This marks the end of the trend of gradually falling inflation rates: As recently as June, statisticians had recorded an increase in consumer prices of 2.2 percent after 2.4 percent in May.

With the July figure now published, inflation proved to be more stubborn than expected. Economists had forecast inflation of 2.2 percent for July. Excluding the strong fluctuations in energy and food prices, inflation remained unchanged at 2.9 percent in July.

Slow decline

The extremely high inflation rates of the past two years are now history. On average for the year, leading economic research institutes expect inflation in Germany to slow down significantly to 2.3% - down from 5.9% in 2023. However, the decline has been sluggish of late. Economists pointed to higher wages, which could lead to price increases by companies.

Consumers are also still feeling the effects of the sharp rise in prices when shopping or eating out. Food prices have risen by more than 30 percent on average in recent years, according to a special analysis by the Federal Statistical Office for the period from January 2020 to May 2024.

Wave of inflation after Ukraine war hits households

In the longer term, consumers' purchasing power has fallen due to the enormous inflation of recent years. Although the average household income grew by 5.1% from 2022 to 2023, according to the Federal Statistical Office, the inflation rate was 5.9%.

Inflation accelerated rapidly after the Russian attack on Ukraine at the beginning of 2022 because energy and, as a result, production and imported goods became much more expensive.

Falling inflation gives the ECB leeway

If inflation falls over the course of the year in Germany and the eurozone as a whole, this would give the European Central Bank (ECB) scope to cut key interest rates further over the course of the year. In June, it lowered its key interest rates again by 0.25 percentage points for the first time since the wave of inflation.

In July, the central bank left interest rates unchanged and kept the door open for a further rate cut at its meeting in mid-September. In principle, the ECB considers price stability to be maintained at an inflation rate of 2.0 percent.

SDA