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Germany Inflation May 2023

Germany: Harmonized inflation falls to over one-year low in May

Harmonized inflation dropped to 6.3% in May from April’s 7.6%. May’s result represented the weakest inflation rate since February 2022. The result was primarily due to a softer rise in energy prices. This weaker increase in energy prices was due to a high base effect, the recent decline in oil and gas prices and the government’s brake on gas, heat and electricity prices.

Accordingly, annual average harmonized inflation trended slightly downwards, coming in at 9.1% in May (April: 9.3%). Meanwhile, consumer price inflation fell to 6.1% in May from the previous month’s 7.2%. Inflation excluding energy and food—a measure of core inflation—eased to 5.4% in May from 5.8% in April.

Lastly, harmonized consumer prices dropped 0.16% over the previous month in May, compared with April’s 0.56% increase. May’s result marked the weakest reading since December 2022.

Our panelists expect average inflation to ease to 3.8% by Q4 2023 and to 2.6% by Q4 2024. A tougher base effect and government measures will gradually reduce price pressures. The recent fall in natural gas prices is a downside risk to the outlook. Persistently high core inflation remains an upside risk, despite finally easing in May after rising for 10 months.

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