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Forbes: Inflation in Germany reaches 50-year high

31-5-2022 |

Inflation in Germany reached 7.9% in May. This is a record since the 70s, when prices jumped due to the oil crisis.

Inflation in Germany accelerated in May, according to preliminary estimates, to a historical maximum of 7.9% in annual terms, according to data from the country's Federal Statistical Office (Destatis). This is the highest indicator for almost 50 years, notes Reuters. Consumer prices in the country rose 7.4 percent in April.

Meanwhile, consumer prices in Germany, calculated according to European Union standards (the harmonized consumer price index, HICP), accelerated to an annualized rate of 8.7% in May. Analysts polled by Bloomberg had forecast an 8.1% increase in HICP.

"Inflation rates similar to those of May 2022 were last seen in Germany in the winter of 1973/1974, when oil prices also rose sharply in the wake of the first oil crisis," Destatis said in a press release.

Energy prices, which jumped after the start of the "military special operation" in Ukraine, had a significant impact on the overall inflation rate. In April it was one and a half times more expensive to import energy than in April 2021. Natural gas increased in price four times during the year (plus 301.2%), imported hard coal - by 322.0%, and petroleum products - by 106.6%.

As a result, in May energy prices in the country increased by 38.3% as compared with the same period last year. Foodstuffs became 11.1% more expensive.

German Finance Minister Christian Lindner acknowledged that inflation carries a "huge risk" for the economy.

"We have to fight it so that there is no economic crisis and that there is no spiral in which inflation feeds itself," Lindner said.

Germany's lower house of parliament has already passed a package of measures that includes allowances and lower energy costs for families with children. Chancellor Olaf Scholz has made it clear that further action can be taken if necessary to protect households and businesses.

However, ZEW economist Friedrich Heinemann believes that although inflation is now close to its peak, the economic pressure on households has just started. "Consumers will have to reckon with further price increases because resources are still scarce and wholesale prices are still rising," he told Bloomberg.

Source: Forbes