Germany’s inflation rate accelerated in August as higher energy costs continued to feed into consumer prices, though underlying inflation remained stable, suggesting the energy shock has yet to spread significantly across the broader economy.
Consumer prices rose 2.9% from a year earlier, up from 2.8% in July and marking the highest rate since April, according to preliminary data from Germany’s Federal Statistical Office, Destatis. Prices increased 0.2% from the previous month.
Energy Inflation Jumps to 10.5%
Energy remained the main driver of the increase, with prices rising 10.5% year over year, accelerating from 8.3% in July and 3.4% in June. The renewed pressure comes as the conflict involving the U.S. and Iran continues to disrupt energy markets and shipping through the Strait of Hormuz.
Oil prices climbed more than 2% on Monday following renewed military exchanges between the U.S. and Iran, with Brent crude trading around $90 a barrel.
The inflationary pressure, however, remained concentrated in energy. Services inflation eased to 2.8% from 2.9%, while food inflation slowed sharply to 0.1% from 0.4%. Goods inflation accelerated to 3.0% from 2.5%.
Core Inflation Holds at 2.4%
Core inflation, excluding food and energy, remained unchanged at 2.4%, providing little evidence so far that the increase in energy costs is generating broader price pressures across the German economy.
Germany’s EU-harmonized inflation rate, the measure used for comparisons across the euro area, also increased to 2.9% in August from 2.8% in July. Economists surveyed by Reuters had expected a higher reading of 3.1%.
The figures arrive ahead of euro-area inflation data and the European Central Bank’s September policy meeting. ECB policymakers are prepared to raise interest rates in September to contain inflationary pressures related to the Iran conflict, Reuters reported, while the extent of any further tightening is expected to depend partly on whether higher energy costs spread to other components of inflation.
