In Germany, the fight against inflation has taken a hit as prices for services have significantly increased, leading to an uptick in the inflation rate in May. According to the Federal Statistical Office, consumer prices rose by 2.4 percent compared to the same month last year, marking the first rise this year. This increase comes after two consecutive months of inflation rates at 2.2 percent, which were the lowest in around three years.
One of the main reasons behind this rise in inflation is the introduction of the Germany ticket for local transport priced at 49 euros per month in May 2023. While this new ticket was meant to dampen prices, its effect is no longer included in the year-on-year comparison due to combined tickets for trains, buses and similar services becoming 3.5 percent more expensive. Services were identified as the main driver behind the price increase, with prices rising by 3.9 percent compared to a year earlier.
Wages are also believed to be contributing to this increase, with sharply rising wages leading to higher costs across various sectors. Prices for insurance rose by 13%, social services by 7.7%, and restaurants by 6.9%. Package holidays also saw a noticeable increase of 5.6%. However, energy costs decreased by 1.1% compared to a year earlier as certain types of fuels became cheaper while district heating and fuels experienced price increases. Food costs increased slightly by 0.6%, with dairy products falling by 5% and fresh vegetables becoming cheaper at around 3%. Olive oil and sugar-related products saw significant price increases as well.
Core inflation, which excludes energy and food prices, stood at a relatively high rate of 3%. Despite this current rise in inflation, economists believe that it will decline over time and fall below two percent in August for the first time since March
