At the moment, the world is witnessing record inflation rates, and Germany is no exception. According to Germany’s Federal Statistical Office, inflation accelerated to 7.9% in May from 7.4% a month earlier. The main driver for running inflation is still soaring energy prices. An additional factor is a jump in Germany’s import prices for other goods, especially food. Germany is currently facing the sharpest price increase since 1974 when the first oil crisis hit. Due to the conflict in Ukraine, the cost of imported goods surged by 31.7% in April compared to the same period last year. Fuel prices soared the most - by 157% on a yearly basis. The cost of natural gas has more than quadrupled compared to the previous year. A noticeable increase is also observed in the price of crude oil and petroleum products. Excluding energy prices, the total cost of imports surged by 17.1% from a year earlier. This factor has definitely had an impact on households’ purchasing power which declined by 1.8% in the first quarter of 2022. Actual wages in Germany increased by 4% but at the same time, prices rose by 5.8%. Earlier, the European Commission predicted the eurozone inflation rate to stand at a record high of 6.1% in 2022. In 2023, the indicator is forecast to reach 2.7%. Experts warn that economic growth in the EU may fall to almost zero this year if the Russian energy supply problem is exacerbated further.
