German consumer prices rose 2.9 percent year-on-year in August, according to final data from Destatis, matching preliminary figures and reaching their highest level since December 2023. Consumer prices increased 0.2 percent month-on-month. The annual reading quickened from 2.8 percent in July and 2.3 percent in June, running further above the European Central Bank medium-term inflation target of 2 percent.
Energy costs drive headline rate
Energy products remained the primary driver of price increases across Europe’s largest economy, climbing 10.5 percent year-on-year in August, which marked the sharpest acceleration since February 2023 when energy prices surged 19.1 percent. Heating fuel costs escalated 49.6 percent year-on-year. Motor vehicle fuel prices advanced 27.7 percent.
Ruth Brand, president of Destatis, stated that high energy prices continued to be the main driver of inflation in August, and energy costs escalating particularly under the impact of the war in Iran made themselves felt very clearly in fuel prices. Meanwhile, some utility components fell during the month. Natural gas prices declined 2.9 percent. Electricity prices dropped 5.5 percent, while district heating costs decreased 1 percent compared with August of the previous year.
Core inflation and ECB policy
Excluding food and energy, Germany’s core inflation rate stood at 2.4 percent in August. Overall goods prices climbed 3 percent year-on-year, while services prices increased 2.8 percent. Food prices edged up 0.1 percent from a year earlier, masking wide divergence among staples: egg prices rose 15.2 percent, fresh vegetables gained 5.2 percent, and fish and seafood prices increased 4.4 percent, whereas oils and fats fell 15.3 percent, fresh fruit decreased 5.6 percent, and dairy products dropped 5.5 percent.
Brent crude oil surpassed $100 per barrel for the first time since mid-July amid supply disruption concerns linked to the conflict, up from around $70 before the war. Carsten Brzeski, head of global macro research and chief economist for Germany at ING, noted that inflation has returned to Germany, and no relief is expected in the short term. The figures arrive as the ECB governing council meets in Berlin to decide interest rates, where markets anticipate a 25 basis point hike to lift the deposit facility rate from 2.25 percent to 2.50 percent.
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Source: Destatis
