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Global Economy

9-euro ticket and fuel discount curb inflation

Despite the sustained increase in energy and food prices, inflation in Germany lost some of its momentum in June. According to the Federal Statistical Office, consumer prices increased by 7.6 percent compared to the same month last year. The Wiesbaden authorities thus confirmed their first estimate. The inflation rate was 7.9 percent in May and 7.4 percent in April.

9-euro ticket and fuel discount dampen inflation

In contrast to the first estimate, the statisticians now also provided specific information on the reasons for the decline in the inflation rate last month. "Price increases for energy products are still the main causes of high inflation," said Georg Thiel, President of the Federal Statistical Office. "The 9-euro ticket and the tank discount had a slightly dampening effect on overall inflation in June 2022."

Even if the Federal Statistical Office was not able to precisely quantify the effect of the relief measures introduced for three months on June 1, it is clearly evident in the figures: the rate of inflation in the transport sector has halved and was still 8.3 percent in June compared to the same month last year. In May it was still 16.3 percent. The statisticians pointed out that the effects of the tank discount cannot be precisely quantified because of the fluctuating crude oil prices. "However, if – without relief measures – the prices for fuel and public transport in June 2022 had remained unchanged compared to May 2022, the consumer price index would have increased by 8.6 percent overall in purely mathematical terms compared to June 2021."

Against the background of these figures, the government relief should also dampen price pressure in the summer months of July and August. However, the inflation rate could spike again once the measures expire at the end of August.

Energy costs continue to be the biggest price driver

In June, energy rose by 38 percent year-on-year due to the Russian war against Ukraine and remains the number one price driver. The prices for light heating oil have more than doubled within a year. Natural gas cost almost 61 percent more than in June 2021 and electricity 22 percent more. Although the rate of inflation for fuel fell somewhat thanks to the tank discount, it was still 33.2 percent in June compared to the same month last year.

Food cost 12.7 percent more than in June 2021. Again, clearly above-average price increases were observed for cooking oils (+43.1 percent), meat (+18.9 percent) and dairy products and eggs (+15.3 percent). . In addition to energy costs, the rise in the price of many foods plays a major role in the current trend in consumer prices. Without food and energy, the inflation rate in June would have been just 3.2 percent, according to calculations by the Federal Statistical Office.

ECB before interest rate turnaround

Inflation rates at the current level have never existed in reunified Germany. In the old federal states there were similarly high values in the winter of 1973/1974. At that time, oil prices rose sharply as a result of the first oil crisis.

In view of the record high inflation in the monetary union, the European Central Bank (ECB) wants to raise its key interest rate next week for the first time since 2011 and to do so again in September.

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