The Iran war had previously driven energy prices sharply higher. In April, the inflation rate stood at 2.9 percent – the highest level since January 2024. The fuel discount, which since May 1 has cut the energy tax on gasoline and diesel by nearly 17 cents per liter, has now provided temporary relief.
Consumer prices actually fell by 0.2 percent from April to May. Energy products cost 6.6 percent more than a year earlier in May – in April the increase had been 10.1 percent. Food prices rose by a relatively moderate 0.4 percent.
The government’s relief at the pump ends in late June. According to economists, how inflation develops depends primarily on the situation in the Middle East. The conflict in the Gulf and the uncertain situation at the Strait of Hormuz could constrain the supply of crude oil and liquefied natural gas in the longer term.
Germany’s so-called Council of Economic Experts expects an average inflation rate of 3.0 percent for the year, but in their spring report they also consider 3.5 percent. Higher energy, production and transport costs could be passed on to food and services.
Source: www.handelsblatt.com
