Inflation in Germany hits highest rate since 1992

A store manager stocks the shelves with new merchandise and inserts a price tag before the early morning opening.
A store manager stocks the shelves with new merchandise and inserts a price tag before the early morning opening. Photo: picture alliance/dpa/dpa-Zentralbild | Georg Wenzel
Consumer prices in Germany rose in December at their fastest pace since June 1992, official data showed on Thursday, pushed up by rising energy costs and supply bottlenecks.

The annual inflation rate climbed to 5.3 percent, accelerating for the sixth month in a row, after a 5.2 increase in November, the federal statistics agency Destatis said in preliminary figures.

Over the whole of 2021, inflation came in at 3.1 percent, the highest year-end figure since 1993. The acceleration had a “number of reasons”, the agency said, including higher costs for energy, supply chain disruptions due to the pandemic and a temporary VAT cut in 2020, which lowers the base against which current price rises are measured.

READ ALSO: How will the cost of living change in Germany in 2022?

The December inflation figures were the last to factor in the tax holiday, introduced to mitigate the impact of Covid-19 lockdowns on the economy. The question that arose was whether inflation had reached its “summit” or if there would be a “further, hitherto unexpected rise”, said Fritzi Koehler-Geib, chief economist at the public lender KfW.

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“Both are conceivable. There is much to suggest that price growth will cool off as a result of the elimination of base effects,” while it remains “uncertain” how quickly bottlenecks or energy price rises would ease.

READ ALSO: German consumer prices hit 29-year high in November

Gas prices have surged in Europe in recent months as demand has soared with economies emerging from their Covid-induced restrictions. The spike has been further fuelled by geopolitical tensions surrounding Russia, which supplies one third of Europe’s gas.

Western countries accuse Russia of limiting gas deliveries to put pressure on Europe amid tensions over the Ukraine conflict to push through regulatory approval for the controversial Nord Stream 2 pipeline set to ship gas to Germany.


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