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German inflation soars on high energy prices

FrankfurtGermany, Sept 30 – German consumer prices rose at their fastest pace since 1993 in September on the back of higher energy prices and one-off tax effects, official data showed Thursday.

Inflation accelerated for the third month in a row, climbing year on year by 4.1 percent, according to first estimates from the federal statistics agency Destatis.

In August, consumer prices in Europe’s largest economy rose by 3.8 percent compared with the previous year.

The surge in inflation was related to a “temporary value-added tax reduction” in Germany in 2020 to counter the economic impact of the coronavirus pandemic and a slump in oil prices in the same year, the agency said.

Limited supply of natural gas has also contributed to rising energy prices for consumers, as countries scramble to secure new shipments.

Energy prices were “likely to remain high until the end of the year,” said Fritzi Koehler-Geib, chief economist at German public lender KfW.

“This should keep headline inflation well above three percent for the rest of the year” before the indicator falls back below two percent, Koehler-Geib said.

Bottlenecks affecting supply of raw materials and industrial components have held back production and pushed up prices globally.

“Only some” of these price increases had so far been passed on to consumers, Destatis said.

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At the same time, prices were flat in September as compared with the previous month, the agency reported.

European Central Bank chief Christine Lagarde has repeatedly said that recent jumps pushing inflation above the bank’s two percent target were down to temporary factors.

On Tuesday, she said the bank must not “overreact” to high inflation driven by supply shortages.

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