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Global Economy

Inflation rate fell again slightly

Inflation in Germany has weakened somewhat for the second month in a row. Consumer prices rose by 7.5 percent compared to the same month last year, according to an initial estimate from the Federal Statistical Office in Wiesbaden. In June, the annual inflation rate was 7.6 percent year-on-year, in May it was 7.9 percent.

Above all, price jumps in energy as a result of the Ukraine war and rising food prices are fueling inflation in Europe's largest economy. In July, energy prices rose by 35.7 percent compared to the same month last year. Food cost 14.8 percent more than a year earlier. According to preliminary data, consumer prices rose 0.9 percent month-on-month in July.

Further relief measures are being discussed

The federal government is trying to relieve people, among other things, with the tank discount introduced at the beginning of June and the 9-euro ticket. In addition, since July 1, electricity customers no longer have to pay for the promotion of green electricity via their electricity bill. Further relief measures are currently being discussed.

According to the statistical office, the preliminary results do not yet show the exact extent to which special effects such as the 9-euro ticket and fuel discount had an impact. These effects will be addressed when the final results are published.

Sustainable decline or not

According to the Reuters news agency, economists had expected 7.4 percent for July. According to the Munich-based ifo Institute, inflation is likely to have peaked and will gradually decline over the course of the second half of the year.

However, other economists are not assuming a sustained decline in inflation – they point to the uncertain development of energy prices, but also to the fact that the 9-euro ticket and fuel discount are limited to the end of August. "The inflation rate is likely to remain high over the next few months. It could even rise again in September because the temporary relief measures will then no longer apply," wrote the Deutsche Bundesbank in its recently published monthly report.

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.

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