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Why inflation could be set to drop 'at a record pace' in Germany

The Local Germany
The Local Germany - [email protected]
Why inflation could be set to drop 'at a record pace' in Germany
A customer buys groceries at the weekly market in Berlin Schöneberg. Photo: picture alliance/dpa | Christoph Soeder

After months of feeling the squeeze at the supermarket checkout, consumers in Germany could soon see inflation drop dramatically.

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Since Russia launched its full-scale invasion of Ukraine back in February 2022, the cost of living has been soaring for consumers in Germany.

At its peak at the end of last year, the country's inflation rate reached into double digits, with energy prices doubling and even tripling for some households.

This year, however, the situation has eased significantly. In September 2023, inflation slipped to 4.5 percent - its lowest level since the outbreak of war in Ukraine. Back in September 2022, inflation was still at 10 percent.  

According to figures released by the Federal Office of Statistics (Destatis) on Friday, there are now signs of another dramatic fall in inflation.

In September, manufacturer prices fell by 14.7 percent year-on-year, marking the sharpest decline since the surveys began in 1949. 

Production and manufacturing prices are usually early indicators of what will happen to consumer prices, since they directly impact the price at which retailers can buy and sell goods. 

Last year, when inflation was reaching its peak, the prices manufacturers received for their goods rose to record rate of 45.8 percent. 

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This was driven by the huge rise in energy prices in the aftermath of the war in Ukraine.

Back in 2022, prices on the oil and gas markets jumped as Russia choked off the supply of these valuable fossil fuels within the EU.

This year, however, the situation has stabilised and energy prices continue to drop.

READ ALSO: EXPLAINED: Why fuel is so expensive in Germany right now

In September, energy prices were more than 35 percent cheaper than they were the year before. 

The next months are likely to see a further decline in consumer price rises. Experts are predicting that inflation will average out at 6.1 percent in 2023 but could drop as low as 2.1 percent in 2024. 

Financial worries 

Despite the more positive economic outlook, a recent survey found that people in Germany were still plagued with worries over their personal finances.

The representative survey 'The Fears of Germans', which was published on October 12th, found that the vast majority of Germans have concerns about the cost of living.

READ ALSO: Which foods in Germany will cost you more as inflation stays high?

This year, the most prevalent fears were the fear of rising living costs, followed by the fear that housing will become unaffordable and that the state would permanently increase taxes or cut benefits. 

Almost two-thirds (65 percent) said rising consumer prices were the biggest worry they faced. 

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