German inflation data: Oath of disclosure for ECB policy

Aktuelle Inflationsdaten aus Deutschland liegen vor

This morning, the Federal Statistical Office published the inflation data (consumer prices) for the full year 2019 and for December 2019 in the second final version. In short, it is once again a clear oath of disclosure for the ECB’s policy. Because it says that it is only thanks to its courageous intervention (keeping interest rates at zero and printing 2.6 trillion Euros) that consumer prices have not become deflationary. They are actually above 1%. Put simply, that is the message of the ECB.

We have been accompanying this topic for years. Does the ECB’s whole big buzz have any effect at all? The inflation data show quite clearly that energy prices have a major influence on the inflation data. And not the ECB’s policy! While the rates of price increase were rather slow, it was recently observed in parallel that energy prices were strongly deflationary, mainly thanks to the weak oil price.

Impact of energy prices

However, in recent months (apart from the last few days) the oil price has risen sharply. The big drop in energy prices (-3.7% still in November compared to November 2018) has turned into a minus of only -0.1% in December according to the latest report. The oil price has an impact on all areas of life via economic connections, and thus on a large part of the price chain! The rise in oil prices causes that the consumer prices in annual comparison only from November to December make a huge leap from +1.1% to +1.5%. Will they weaken again in January because the oil price has recently returned? We will see! With regard to the current data, we quote today’s statements by statisticians:

The main reason for the higher inflation rate compared to the previous months was the development of energy prices. In December 2019, they were only 0.1 % below the level of the same month of the previous year (November 2019: -3.7 % compared to November 2018). From December 2018 to December 2019, prices of light heating oil (-6.2 %) and fuels (-4.5 %) in particular fell. However, some energy products became significantly more expensive, for example natural gas (+5.2%) and electricity (+4.1%). Excluding energy prices, the inflation rate would have been 1.8% in December 2019.

Food prices rose by 2.1 % between December 2018 and December 2019. Meat and meat products were significantly more expensive (+5.5 %).

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