Germany Inflation (HICP, ann. var. %, aop)

Harmonized inflation falls to lowest level since August 2022 in January

Harmonized inflation came in at 9.2% in January, which was down from December’s 9.6%. January’s reading marked the weakest inflation rate since August 2022 and significantly undershot market expectations.

The trend pointed up, with annual average harmonized inflation coming in at 9.0% in January (December: 8.7%). Meanwhile, consumer price inflation rose to 8.7% in January, from the previous month’s 8.1%.

Finally, harmonized consumer prices increased 0.49% in January over the previous month, contrasting December’s 1.21% drop. January’s jump marked the highest reading since October 2022.

Interpreting January’s inflation figure is difficult given that the statistical office provided no details on the main factors driving the change or how it had accounted for recent government support to cut consumers’ energy bills.

In any case, our panelists expect inflation to ease as the year progresses, dropping to 4.1% in Q4 2023. A tougher base effect will help drive the deceleration. Government support will also play a role—the Bundesbank estimates that the measures will help bring inflation down by 1.5 percentage points this year. Meanwhile, the recent fall in natural gas prices poses a downside risk to the outlook, and stubbornly high core inflation—which remained at a record 5.2% in January—poses an upside risk to the outlook.