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Why inflation in Germany could slow down despite soaring food prices

The Local Germany
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Why inflation in Germany could slow down despite soaring food prices
Popular food items in Germany displayed in a shopping cart in Neubiberg, Bavaria in January. Photo: picture alliance/dpa | Sven Hoppe

New statistics released on Monday show wholesale prices sinking for the first time in more than two years - which means consumers in Germany could soon get some respite from sky-high inflation.

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After the inflation shock that struck following Russia's invasion of Ukraine, there are early signs that the dizzying upwards trend in prices could soon start to ease off a little.

According to new data from the Federal Office of Statistics (Destatis), wholesale prices in Germany sunk by 0.5 percent in April against the same month the previous year.

This represents the first year-on-year drop in wholesale prices since December 2020, when there was a drop-off of 1.2 percent. 

Since then, prices for retailers have generally been increasing at a rapid rate, with these increased costs generally being passed onto consumers. In March, prices on the wholesale market had risen by two percent year-on-year, while in February the wholesale rate of inflation stood at 8.9 percent.

In April, however, not all wholesale prices went down.

The cost of fruit, vegetables and potatoes went up by a whopping 22 percent, building materials and building elements made of mineral substances went up by 13.9 percent and the cost of livestock went up by 11.4 percent. 

Drop in inflation

Still, the overall lower prices on the wholesale market could spell good news for consumers who are struggling with the high cost of living.

Wholesalers are the go-betweens who link manufacturers with the retailers and end consumers. The prices they set normally have an impact on the prices in the shops, with price increases or decreases reaching ordinary customers after a short delay.

With wholesale prices currently dropping, this could spell an easing off of the current rate of inflation, with consumer prices potentially rising at a slower rate for the remainder of the year.

READ ALSO: German recession fears rise as factory orders plummet

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At 7.2 percent, inflation in April was the lowest it's been since August 2022 - another sign that inflation may now have peaked in Germany.

Consumer prices are expected to rise by 5.9 percent this year, followed by 2.7 percent in 2024. This is compared to 6.9 percent in 2022, when the war in Ukraine had caused energy prices to soar. 

Petrol driving lower costs

While wholesale prices have dropped on average by 0.5 percent, there were significant differences when it came to different products.

The price of petroleum products like petrol went down by 15.7 percent year-on-year, making it a major driver of April's lower inflation rate. This is part of a trend of lower energy prices that have been dampening inflation in recent months. 

Other products that showed a significant drop in price included scrap and residual materials (-31.5 percent), cereals, raw tobacco, seeds and animal feed (-25.2 percent), ores, metals and semi-finished metal products (-20.5 percent) and chemical products (-5.4 per cent). 

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