German inflation slows to five-month low on energy aid

GERMAN inflation slowed in January to the lowest level in five months, thanks to further government aid to ease the burden on households from soaring energy costs.

Consumer-price growth eased to 9.2 per cent from 9.6 per cent in December 2022, said Germany’s statistics agency Destatis on Thursday (Feb 9). It had postponed the data’s scheduled release last week due to processing problems.

That delay forced the European Union’s statistics agency, Eurostat, to make an estimate for the continent’s biggest economy as part of its reading for the entire 20-nation eurozone a week ago.

Thursday’s number is more than half a point higher than Eurostat’s assumption – raising the likelihood of a revision when final figures are published on Feb 23.

Interpreting the data is complicated by the regular repricing of households’ energy contracts and various relief measures from the government. There was also an update to the consumer-price basket that Destatis uses for its calculations. Because of that change, the agency did not publish a breakdown of the separate components.

Germany picked up consumers’ natural-gas bills in December 2022, while a cap on electricity prices took effect in January. A ceiling on heating will kick in next month, with households to receive reimbursements backdated for the first two months of the year.

Since Eurostat’s inflation reading last week, the European Central Bank (ECB) has raised borrowing costs by another 50 basis points, and has signalled a hike of the same magnitude at its next meeting in March. 

Policymakers are worried that stubborn underlying price pressures – core inflation remained at a record 5.2 per cent in January – could ignite a wage-price spiral, demanding even higher interest rates. 

In an interview with Boersen-Zeitung, Bundesbank president Joachim Nagel said that there is a “great danger” that inflation will become sustained if the ECB lets up too soon.

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