1.9 percent in August

German inflation back below the two percent mark

Inflation in Germany fell below the two percent mark in August for the first time in around three and a half years. Falling energy prices were one of the contributing factors, as the Federal Statistical Office announced on Thursday.

In August, goods and services only became 1.9 percent more expensive on average compared to the same month last year. In July, inflation had risen to 2.3 percent. The decline is mainly due to falling energy prices. "Petrol, diesel and heating oil were cheaper in August than before," said economists at Landesbank Hessen-Thüringen.

Services, on the other hand, rose at an above-average rate of 3.9 percent. "High wage agreements continue to drive up service prices", they said. Many companies are trying to pass on increased personnel costs to their customers. Food prices were 1.5 percent higher on average than in August 2023.

"Things are picking up again"
However, the all-clear has not been given. "From now on, things will unfortunately start to pick up again," said chief economist Cyrus de la Rubia from Hamburg Commercial Bank. In the next six to twelve months, the rate is likely to move towards three percent. The fall in energy prices in the fall of 2023 means that the inflation rate will soon pick up again somewhat, said Chief Economist Holger Schmieding from Berenberg Bank. "These are the often-cited base effects."

The European Central Bank's (ECB) inflation target for the currency area is two percent and is therefore within sight. There is currently speculation on the financial markets that interest rates will be cut in September.