Germany: Inflation eases in January
Harmonized inflation dropped to 3.1% in January, down from December’s 3.8% and slightly lower than the market had been expecting. The deceleration was largely due a lower price pressures for energy and food, with last month’s jump in inflation largely due to a statistical base effect.
Annual average harmonized inflation fell to 5.5% in January (December: 6.0%). Meanwhile, consumer price inflation dipped to 2.9% in January, from the previous month’s 3.7%, while core inflation eased to 3.4% in January, from 3.5% in December.
Lastly, harmonized consumer prices decreased 0.16% over the previous month in January, contrasting the 0.24% rise seen in December.
Our panelists expect harmonized inflation to average around Q4 2023 levels in Q1 2024, before declining more sharply in H2 2024 on weak domestic demand and the lagged impact of past ECB rate hikes. That said, inflation is only seen returning to the ECB’s 2.0% target in 2025, with energy prices this year expected to exceed pre-Ukraine war levels. Further commodity-price spikes and wage-price spirals pose upside risks.