German Inflation Jumps Above 4%, Highest in Three Decades
German consumer prices are rising at the fastest pace in nearly three decades, fueled by supply bottlenecks and a series of temporary pressures accompanying the economy’s pandemic recovery.
Inflation jumped to 4.1% in September, exceeding economists’ median estimate, according to data from the Federal Statistics Office. Energy alone was 14% more expensive than last year, when wide-ranging coronavirus restrictions curbed demand and prices.
Europe’s largest economies -- all experiencing strong growth following the end of lockdowns at the start of summer -- are reporting a similar trend. France, Italy and Spain were among those with inflation rates far above 2% -- the goal the European Central Bank aims to achieve sustainably for the euro area.
Economists predict price growth in the 19-nation region accelerated to 3.3% this month, the highest in 13 years. Those data are due on Friday.
|What Bloomberg Economics Says...|
“Germany’s inflation rate accelerated sharply in September. Most of the increase is probably explained by statistical effects linked to lower weights on travel-related services in the HICP basket. In contrast, the constant-weight domestic reading increased by less, mostly driven by energy prices.”
--Maeva Cousin, senior euro-area economist. Read full REACT
So far, policy makers have insisted that the spike is largely transitory, reflecting statistical effects including changes to German sales taxes and the timing of summer sales that will disappear next year.
Recently though, they’ve also highlighted the risk that material shortages and transportation logjams could produce more persistent price pressures that could ultimately lead to higher wages. If that happens, the ECB must be ready to respond, Governing Council member Gabriel Makhlouf said in a Bloomberg TV interview.
New projections are due in December and will help officials set the course for monetary stimulus once pandemic measures expire early next year. While upward revisions for this year are possible, inflation is unlikely to be strong enough in the medium term to warrant a sharp shift in stance.
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