Inflation, which decreased in Germany in February, gained momentum again in March with the increase in energy costs triggered by the tension in the Middle East.
The German Federal Statistical Office (Destatis) announced the preliminary consumer price index (CPI) data for March.
Accordingly, inflation exceeded 2 percent, the target level of the European Central Bank (ECB), in March due to the increase in energy prices.
Annual inflation in Germany, which was 1.9 percent in February, rose to 2.7 percent in March. The expectation in the markets was that annual inflation would be 2.8 percent.
The biggest factor in the rise in inflation was energy prices, which had a downward trend in recent months but increased by 7.2 percent on an annual basis in March. With this increase, an annual increase was recorded in the energy item for the first time since the end of 2023.
While the CPI increased by 1.1 percent on a monthly basis, the European Union (EU) compatible CPI was 2.8 percent annually and 1.2 percent monthly.
While the increase in food prices was limited to 0.9 percent annually, the 3.2 percent price increases in the service sector maintained the pressure on inflation. Core inflation, calculated excluding energy and food, remained stable at 2.5 percent in March.
Economists warn that annual inflation may approach 3 percent in the coming period as companies begin to pass on increasing production and transportation costs to consumers. The increase in the “Price Expectations Index” published by the German Economic Research Institute (Ifo) from 20.3 points to 25.3 points in March also reveals that companies are planning more raises in the coming months.
High inflation is expected to increase the pressure on the already stagnant German economy. While consumers are expected to reduce their spending due to rising prices, Germany’s leading economic research institutes halved their growth forecasts for this year to 0.8 percent.
It is noteworthy that a similar picture prevails throughout Europe, which is dependent on energy imports.
The European Statistical Office (Eurostat) will publish preliminary March inflation data for the Eurozone tomorrow. Markets expect annual inflation in the Eurozone to rise to an average of 2.7 percent.
