The decline in inflation in Germany stops: it’s steady in April | EUROtoday

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The decline in inflation in Germany stopped in April, recording a +2.2% year-on-year: the preliminary information estimated by the federal statistics institute Destatis is on the similar degree as March.

The excellent news is that power costs in April 2024 have been 1.2% decrease than the identical month final yr, regardless of the top of the power value curb beginning in January 2024 and the top of the non permanent discount in VAT (from 19 to 7%) for gasoline and heating from April. On the opposite hand, meals costs rose by 0.5% in April in comparison with the identical month in 2023. The affect of the Easter holidays which normally exert upward strain on costs this yr was in March and solely on Easter Monday the primary April.

Although the April estimate is barely higher than the +2.3% anticipated by economists and markets, the truth that inflation has not fallen after three consecutive months (after +3.7% in December 2022, it fell in January at +2.9%, February +2.5%, March and April +2.2%) leaves many query marks open about the way forward for value tendencies in Germany.

Economists at Commerzbank count on the core inflation charge to stabilize round 3% within the coming months: firms within the service sector, particularly, will cross on the large enhance in wage prices to their clients. «The most important issue that can drive developments within the coming months would be the extent to which firms are in a position to cross on the elevated wage prices to their clients – they clarify -. The current stronger short-term upward momentum in service costs exhibits that firms have began to cross on wage prices to clients and it will proceed within the coming months. For this cause, the core inflation charge ought to stabilize round 3%.”

According to Fritzi Köhler-Geib, chief economist of KfW (German CDP), «risks remain for the timely achievement of the inflation target (editor's note: 2% in the medium term). A decisive factor will be how weak productivity growth, combined with strong wage increases, determines the overall economic pressure on prices.”