Trend reversal expected: inflation rate stagnates unexpectedly

Experts had expected inflation to fall - but it is stubbornly high.

Trend reversal expected: inflation rate stagnates unexpectedly

Experts had expected inflation to fall - but it is stubbornly high. Prices rose again by 8.7 percent. Consumers had to dig deeper into their pockets, especially for groceries. However, experts assume that the period of high price increases is coming to an end.

Contrary to expectations, the increase in consumer prices did not weaken in February. As in January, goods and services rose by an average of 8.7 percent, according to an initial estimate by the Federal Statistical Office. Economists, on the other hand, had expected a decline to 8.5 percent. Compared to the previous month, prices rose by 0.8 percent.

Energy cost 19.1 percent more in February than a year earlier. This weakened the rise in prices here: in January there was still an increase of 23.1 percent. Food, on the other hand, rose more sharply by 21.8 percent than last time by 20.2 percent. Services cost an average of 4.7 percent more than in February 2022.

Experts are now expecting a turn for the better by next month at the latest. "Since the explosive increase in energy and food prices after the start of the war in late February 2022 is no longer in the year-on-year comparison, the overall inflation rate is likely to drop noticeably from March," said Holger Schmieding, chief economist at Berenberg Bank.

In a number of federal states, the costs for fuel and light heating oil did not rise quite as sharply in February. "But this good news is more than offset by higher prices in other areas," said Schmieding. The increasing desire to travel among citizens is likely to have contributed to the fact that package holidays in North Rhine-Westphalia cost 8.1 percent more in February than in the previous year after a rate of 6.2 percent in January. Citizens also had to spend significantly more on overnight stays in hotels and on eating out in restaurants. "High heating costs, expensive groceries and the lack of waiters and other staff are noticeable here," said Schmieding.

A survey by the Munich IFO Institute also suggests that inflation is slowing down. Accordingly, significantly fewer German companies want to increase their prices in the next three months. The barometer for price expectations in the economy as a whole fell to 29.1 points in February, after 35.2 points in January. That was the fifth decline in a row. "Companies have already passed on a large part of the increased costs to their customers, while at the same time demand is falling in almost all sectors of the economy," said economic chief Timo Wollmershäuser: "This should reduce inflationary pressure in the coming months."