Germany’s Inflation Hits 41-year High as Energy Prices Surge Nearly 40 Percent

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, on April 5, 2022. Staff/Reuters

Germany’s annual pace of inflation surged to its highest pace since 1981, largely on the back of a nearly 40-percent surge in energy prices.

Data released by German statistics office Destatis on April 12 shows that, in March, consumer prices rose 7.3 percent year-over-year and 2.5 percent month-over-month.

Noting a range of “current crises,” including the war in Ukraine and the lingering effects of the pandemic, the agency said that supply chain bottlenecks and elevated input costs were continuing to have an impact on inflation.

”In addition to the COVID-19 pandemic, the Russian war against Ukraine now also has a marked impact on the rate of price increase in Germany, especially for heating oil, motor fuels, and natural gas as well as some food products,” said Georg Thiel, president of Germany’s Federal Statistical Office, in a statement.

Supply chain bottlenecks in the delivery of intermediate goods in Germany’s manufacturing sector slowed economic growth and pushed up prices substantially last year, according to a December analysis by the country’s statistical agency. Its so-called “scarcity” gauge for manufacturing, which reflects shortages of raw materials and intermediate products, showed an unprecedented spike toward the end of 2021.

‘Massive’ Surge in Energy Prices

Surging energy costs, which have been a major factor pushing up inflation rates across the world, were the main driver pushing Germany’s rate of inflation to its highest level in 41 years.

Energy prices in March rose 39.5 percent year-over-year and 16.4 percent month-over-month, with the statistical agency describing the increase as “massive.”

Heating oil prices surged a staggering 69.7 percent over the month and 144 percent over the year. Motor fuels saw a substantial spike, rising 22.9 percent over the month and 47.4 percent in the 12 months through March. Natural gas rose 4.7 percent from February to March and 41.8 percent year-over-year.

Food prices saw a relatively small jump of 0.8 percent over the month and 6.2 percent over the year.

So-called core inflation, which strips out the volatile categories of energy and food and reflects underlying inflationary pressures, rose 3.4 percent year-over-year.

Germany’s inflation numbers come ahead of a planned release of consumer price data in the United States, which are expected to have vaulted to a fresh multi-decade high.

‘Extraordinarily Elevated’ US Inflation

Consensus forecasts predict March year-over-year inflation to hit 8.4 percent in the United States, up from 7.9 percent a month prior.

White House press secretary Jen Psaki told reporters at an April 11 briefing that Tuesday’s U.S. inflation reading is expected to be “extraordinarily elevated” largely owing to “global disruptions in energy and food markets,” which Psaki described as “Putin’s price hike.”

While the war in Ukraine has pushed up energy prices and caused a disruption to food exports from Ukraine’s Black Sea ports, a number of economists have balked at blaming Russia’s President Vladimir Putin’s actions in Ukraine for the long run of high prices in the United States.

“Memo to Jen: No one in America believes inflation has anything to do with Putin. It was here before the war and will remain after. Stop treating people as if they were stupid,” economist Jim Rickards said in a Twitter post reacting to Psaki’s remarks.

Republicans and conservative groups blame surging inflation on President Joe Biden’s policies.

Americans For Prosperity, a conservative advocacy group, recently launched a campaign blaming the highest rate of inflation in decades on “trillions of dollars in new spending that members of both parties have approved in recent years—coupled with antiquated regulations that stifle energy supply and economic growth.”

U.S. consumers have boosted their future inflation outlook, with a survey released on Monday by the New York Federal Reserve showing that expectations for where inflation will be in one year have risen to 6.6 percent in March, the highest reading in the history of the data series, which dates back to 2013.