Germany: Harmonized inflation eases less than forecast in May
Latest reading: Harmonized inflation inched down to 2.1% in May from April’s 2.2%. May’s figure marked the lowest inflation rate since September 2024. Still, the reading remained above the ECB’s 2.0% target for the eighth straight month and slightly exceeded both market estimates and the Euro area average. Looking at the details of the release, recreation and transport costs eased, outweighing a sharper increase in housing and hospitality prices.
The broader inflation trend remained stable, with annual average harmonized inflation unchanged at 2.4%—the same as in April’s. Meanwhile, consumer price inflation was stable at April’s 2.1% in May, the joint-softest result in seven months.
Finally, harmonized consumer prices increased 0.15% in May over the previous month, decelerating from April’s 0.46% rise.
Outlook: Our panelists see inflation hovering around May’s level through year-end. Upward pressure from interest rate cuts and a weaker euro should broadly offset the downward impetus from subdued private spending plus a cooling labor market that is easing wage pressures. As a result, price pressures should average at a five-year low in 2025 as a whole, though remaining slightly above the ECB’s 2.0% target. Faster wage growth and EU retaliatory tariffs are upside risks, while the timing and scale of fiscal stimulus will be key to monitor.