German inflation skyrocketing! It reached a 50-year high in August

Germany, german economy

The annual inflation rate in Germany rose to 8.8 percent in August, as measured by the Harmonised Index of Consumer Prices. This is the most since the first oil shock that hit the country in late 1973 and early 1974.

On Tuesday, the Federal Statistical Office published a preliminary estimate of August inflation. According to its methodology, it reached 7.9 % in annual terms, but according to Eurostat’s methodology, which uses the so-called harmonised index of consumer prices, it is already close to 9 %. Inflation in Germany rose by 0.3 and 0.4 percentage points respectively compared with the previous month.

Food taking energy’s place

While inflation had accelerated in previous months mainly due to rising energy prices, the focus of price increases was now shifting to food. The annual growth rate of energy prices is slowing down (to 35.6 per cent in August, down from 38.3 per cent in May), while food prices are accelerating (from 11.1 per cent in May to 16.6 per cent in August).

Interest rate hike to follow

Accelerating German inflation is likely to be the main source of rising inflation at euro area level as well. Several people in the European Central Bank’s management have therefore indicated that interest rates will also rise a little faster.


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