Skyrocketing energy prices lead to highest inflation rate in reunited Germany

Soaring energy prices in March have led to a year-on-year inflation rate hike in Germany to 7.3 percent – the highest level since the country's reunification in 1990, according to a report by the Federal Statistical Office (Destatis). Delivery bottlenecks and significant upstream price increases both had an impact on the inflation rate. Measured in the consumer price index (CPI), inflation was up 5.1 percent in February compared to the previous year. Destatis noted that similarly high inflation rates were last recorded in West Germany in autumn 1981, when mineral oil prices markedly increased due to the Iraq-Iran War. On a month-to-month basis, consumer prices rose 2.5 percent from February to March.

“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 Destatis President Georg Thiel. Overall, energy prices in March rose 39.5 percent year on year. Heating oil more than doubled, experiencing a 144 percent jump; motor fuel rose over 47 percent, and natural gas climbed 42 percent. Price increases for other energy products also far exceeded the overall inflation rate, the report notes. Solid fuels were up nearly 20 percent and electricity increased more than 17 percent.

“In addition to crisis-related effects, the increase in the [national CO2 price on transport and heating fuels] from 25 euros to 30 euros per tonne of CO2 had an impact here,” the report states. In addition to energy products, Destatis also recorded price increases for other goods and services, including food, as a result of the current crises. The German government has agreed on support packages for businesses as well as for consumers due to the rising prices.