The Federal Statistical Office published its preliminary results on the development of the German inflation rate in April 2022. According to the calculations, the inflation rate measured by the German consumer price index recorded a slight increase to 7.4 per cent. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at ZEW Mannheim, has commented on this matter:

Image of the ZEW economist Friedrich Heinemann.
ZEW economist Friedrich Heinemann comments on the development of the German inflation rate in April 2022.

“The high double-digit inflation rates in wholesale and import prices show that much more inflation is in the pipeline. The devaluation of money has long since ceased to be an abstraction, but is very clearly felt in people’s everyday lives. This also increases the risk of a recession, because private consumption, as an engine of growth, could falter in the face of strong inflationary uncertainty. The ECB is not responsible for the current price surge as a result of Russia’s war. Nevertheless, it has a responsibility to offer a credible strategy for a price-stable future. A quick exit from bond purchases and a timely first interest rate hike are inevitable.”

The Federal Statistical Office published its preliminary results on the development of the German inflation rate in March 2022. According to the calculations, the inflation rate measured by the German consumer price index climbed further from 5.1 per cent in February to 7.3 per cent in March. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at ZEW Mannheim, has commented on this matter:

“The further acceleration of inflation is the result of a classic supply shock. As the availability of energy and food declines, prices inevitably rise. The level of inflation in the coming months will require level-headed responses. Policymakers should adopt a clear communication strategy in this regard. The message must be: The Ukraine war is making us all poorer and a loss of purchasing power is economically inevitable. It is wrong for the German government, with its imprecise aid programme, to pretend that the state can compensate for the losses of all citizens. While it is right to include targeted aid for low-income households in the package, undifferentiated elements such as the energy allowance for the entire working population are unnecessary. German fiscal policy was already not sufficiently targeted during the COVID-19 crisis. This far too expensive approach must not be repeated in the current energy crisis. Otherwise we will end up financing the high energy prices largely through additional government debt. That would be fiscal nonsense.”

The Federal Statistical Office published its preliminary results on the development of the German inflation rate in February 2022. According to the calculations, the inflation rate measured by the German consumer price index climbed from 4.9 per cent in January to 5.1 per cent in February. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at ZEW Mannheim, has commented on this matter:

“Russia’s invasion of Ukraine has further diminished hopes for a significant decline in inflation over the course of the year. The price surge for energy, raw materials and grain triggered by the war will further fuel the still high price dynamics. The risk that inflation will remain high in the longer term is also increasing. The inevitable rapid exit from Russian gas and oil imports will make energy in Germany more expensive in the long run. Added to this are the effects of rising defence spending, which will further increase the high capacity utilisation of the German industry. This additional demand stimulus comes up against an already tight labour market with a high shortage of skilled workers. All this will push wages and prices up further. The Kremlin is now also driving German inflation.”

The Federal Statistical Office published its preliminary results on the development of the German inflation rate in January 2022. According to the calculations, the inflation rate measured by the German consumer price index fell only slightly, from 5.3 per cent in December to 4.9 per cent in January. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at ZEW Mannheim, has commented on this matter:

“Hopes for a significant fall in inflation at the beginning of the year have not been fulfilled. This had already been apparent for several months. It is true that the VAT increase in January 2021 is no longer noticeable year-on-year. However, this price-dampening base effect is offset by the very strong rise in electricity, gas and petrol prices, which is now fuelling inflation further. The resulting price pressure will persist because companies will keep passing on the much higher procurement costs to end consumers by adjusting prices. The year 2022 started inflationary and will remain so. In contrast, current wage settlements are not keeping up with inflation. This is advantageous from an inflation perspective because a wage-price spiral is not yet visible. For many workers, however, this means that they will continue to lose purchasing power in 2022.”

The Federal Statistical Office published its preliminary results on the development of the German inflation rate in November 2021. According to the calculations, the inflation rate measured by the German consumer price index rose further to 5.2 per cent compared to the previous month. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at ZEW Mannheim, comments on this matter:

“Germany is experiencing the strongest rise in inflation in three decades. But the increase to over five per cent is no reason to panic. The November figure could already be the peak of the inflation surge. The strong downward correction of oil prices and the inevitable new contact restrictions in the fourth wave of the pandemic will quickly have a dampening effect on prices. In addition, a statistical slowdown effect on inflation can be expected from January onwards, as the VAT increase a year ago drops out of the year-on-year comparison. While it is certain that the inflation rate will fall from January, it remains unclear whether Germany will see inflation rates close to the two per cent mark again in the next two years. This will be decided in the upcoming wage negotiations and ultimately also in the ECB Governing Council.”

Date

28.04.2022

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