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Germany Inflation March 2023

Germany: Harmonized inflation declines to one-year low in March

Harmonized inflation eased to 7.8% in March, following February’s 9.3%. March’s reading represented the weakest inflation rate since March 2022. The result was primarily due to lower price increases for energy—3.5% in March compared to 19.1% in February. This slowdown was due in part to a higher base effect, with recent declines in oil and natural gas prices also playing a role.

The trend was unchanged, with annual average harmonized inflation coming in at February’s 9.3% in March. Meanwhile, core inflation is estimated by several analysts to have risen in March. Consumer price inflation fell to 7.4% in March, from February’s 8.7%.

Lastly, harmonized consumer prices rose 1.05% over the previous month in March, picking up from February’s 0.98% increase. March’s figure marked the highest reading since October 2022.

Our panelists expect average inflation to ease to 4.1% by Q4 2023. A tougher base effect and government measures will drive the deceleration. Meanwhile, the recent fall in natural gas prices poses a downside risk to the outlook, while stubbornly high core inflation—which rose again in March—poses an upside risk. This upside risk has grown in recent weeks as a result of public sector workers securing a 5.5% pay increase for 2024 in April.

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