Germany with the highest inflation in nearly 30 years

The Federal Statistics Office reported that inflation rose to about 3.1 percent annually, after another price hike last December. The last time the rate was higher was in 1993 and it was 4.5 percent. In the crisis of 2020, the annual inflation rate was 0.5%.

The upward trend in prices intensified in December 2021. The prices of consumer goods and services increased by 5.3 percent compared to the same month in 2020. With this, the monthly inflation rate reached its highest level in the past year.

According to experts from the Federal Statistical Office, there are many reasons why inflation in 2021 is so high. On the other hand, these are the so-called base effects, which result from the relatively low prices in the first year of the epidemic (2020), which were strongly marked by a collapse in demand. explained George Thiel, Chairman of the Board of Directors of the Federal Statistical Office.

The recent sharp rise in inflation has become a test of many people’s resilience: According to a YouGov poll commissioned by Postbank, one in nine Germans can barely cover the cost of living. Among respondents in households with a net monthly income of less than 2,500 euros, 17 percent said they could barely cover their normal expenses due to the high prices.

According to the Ifo Institute, consumers and businesses should prepare for further price increases. “Companies are charging their customers with increased costs for energy, semi-finished products and goods,” said Timo Walmerscheiser, an economist at IFO in Munich.

Even if market prices for natural gas, electricity and crude oil remain unchanged, experts say, high inflation levels will remain for some time to come. It seems unlikely that wage costs will increase inflation further. Wage negotiations so far do not refer to a wage-price spiral. Wollmershaeuser said we expect salaries to increase by less than two and a half per cent this year and next. This is an increase on the level of the years preceding the coronavirus crisis.


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