Brandenburg Gate in Berlin, Germany

Germany Inflation January 2022

Germany: Harmonized inflation falls in January

Harmonized consumer prices increased 0.90% from the previous month in January, accelerating from December’s 0.27% increase. January’s uptick marked the highest reading since January 2021, and driven by notable increases in food and non-alcoholic beverages, housing, water, electricity, gas and other fuels, and transport prices. This is in part due to pricier energy. On the other hand, clothing and footwear, and recreation and culture prices fell markedly.

Harmonized inflation dropped to 5.1% in January, following December’s 5.7%. January’s result represented the lowest inflation rate since October 2021. Annual average harmonized inflation rose to 3.5% in January (December: 3.2%).

Dr. Ralph Solveen, senior economist at Commerzbank, added:

“The inflation rate in Germany has not only risen sharply in recent months, the price increases have also gained in breadth. The inflation rate for more and more goods is significantly higher than a year earlier. The main drivers continue to be higher energy costs and supply bottlenecks for many goods. But the risk is increasing that even after the current price drivers have weakened, the inflation rate will be noticeably higher than before the crisis. […] This is all the more true as economic policy will continue to boost the economy, despite the ECB’s looming change of course, and thus capacity utilization will continue to increase. Against this backdrop, it will be easier for employees to compensate for the increasingly noticeable inflation in wage negotiations. In addition, there are some more structural factors which point to a steeper rise in consumer prices in the coming years. These include a falling global labor supply for demographic reasons, the cost of decarbonizing the economy, increasing regulation and the global trend toward greater protectionism.”

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