Germany Inflation October 2020


Germany: Harmonized inflation reaches record-high in October

November 10, 2021

Harmonized consumer prices rose 0.54% in October over the previous month, after September's 0.27% increase. October's figure marked the fastest increase in prices since July. The print came on the back of a marked rise in energy prices, offsetting seasonal package holidays discounts.

Harmonized inflation jumped to 4.6% in October, from September’s 4.1%. October's figure represented the highest level on record. The annual rise in prices reflects the reinstatement of the VAT, strong commodity price growth and supply bottlenecks. In addition, the trend pointed up, with annual average inflation coming in at 2.1% in October (September: 1.7%).

Commenting on the data, Carsten Brzeski, global head of macro at ING, stated:

“The headline is not new and the reasons for the surge in inflation aren’t either. It is still the full base effects from a VAT reversal […] as well as higher energy prices and price mark-ups post-lockdown in the leisure and hospitality services which are contributing to the rise. Without this series of one-off factors, German headline inflation could, according to our estimates, be some 1.5 percentage points lower. To be clear, this would still be above the ECB’s 2% target.”

Commenting on the outlook for inflation next year, analysts at the EIU added:

“We anticipate a sharp easing in January 2022 as changes in the value-added tax (VAT) rate, oil prices, carbon emissions costs and the minimum wage fall out of the annual comparison period. Strong domestic demand will become a more important driver of consumer price growth in 2022, alongside continued energy price pressures and supply-chain disruptions, as private consumption continues to bounce back.”

FocusEconomics panelist expect harmonized inflation to average 2.1% in 2022 and 1.7% in 2023.


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Germany Inflation Chart

Germany Inflation October 2021 1

Note: Annual and monthly variation of consumer price index in %.
Source: Federal Statistics Office (Destatis) and FocusEconomics calculations.

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