Price increases in Germany slowed significantly at the beginning of the new year. In January, consumer prices were 2.9 percent higher than in the same month last year, as the Federal Statistical Office announced. After 3.7 percent in December, the inflation rate reached its lowest level since June 2021, when it was 2.4 percent. The Wiesbaden authorities confirmed preliminary information.
According to the Federal Office, despite the increase in the CO₂ price in January, energy cost 2.8 percent less than a year earlier. Food prices rose by 3.8 percent, although the price increase in this area continued to moderate. Overall, the price level increased by 0.2 percent from December 2023 to January 2024.
Further decline in inflation rate expected
Economists expect the inflation rate in Europe's largest economy to fall further over the course of the year. However, the pace could slow down. Stress factors include the increase in the CO₂ price from 30 euros per ton of carbon dioxide (CO₂) to 45 euros and the return to the regular VAT rate on food in restaurants at the beginning of the year. Commerzbank chief economist Jörg Krämer recently warned that the fight against inflation is not yet won.
Higher inflation rates reduce the purchasing power of consumers. You can then afford one euro less. The burden on people in Germany caused by inflation was comparatively high last year. The annual average rate was 5.9 percent, which was lower than in 2022 when it was 6.9 percent. But it was still the second highest annual figure since reunification. After the start of the Russian war of aggression against Ukraine in February 2022, energy and food prices in particular rose sharply, which boosted inflation overall.