German Inflation Climbs to Highest Since 2018 as Lockdown Eases

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Germany’s inflation rate rose to the highest level since October 2018 after local authorities started to lift coronavirus restrictions on restaurants, shops and cultural venues.

Consumer prices in Europe’s largest economy increased 2.4% in May, exceeding economists’ estimates for a 2.3% gain. The reading adds to pick-ups in Spain and Italy released earlier on Monday, and a report for the euro area on Tuesday is expected to show inflation rising to 1.9%.

German Inflation Climbs to Highest Since 2018 as Lockdown Eases

Germany’s Bundesbank has said that inflation in the country could climb as high as 4% this year, a level not seen since the euro was introduced more than two decades ago. Price are being boosted by several special factors, such as a reversal of last year’s sales-tax cut and changes to the basket of goods and services.

Inflation is also seeing spikes across the globe as the end of lockdowns bolsters demand for goods and services amid widespread material shortages and supply-chain disruptions. In May, prices for leisure, entertainment and culture as well as clothing and shoes surged across Germany. Energy and fuels were also more expensive.

While the euro area appears to be on the cusp of a broad economic recovery, policy makers at the European Central Bank have stressed that price increases must be treated with caution, and that it’s still premature to talk about an unwinding of monetary support. The institution presents updated economic projections on June 10.

©2021 Bloomberg L.P.

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