Lower energy costs and the introduction of Germany’s nationwide 49-euro transport ticket have eased inflation rates to 6,1 percent in May. However, base effects from last year’s 9-euro ticket and fuel discounts mean the figures could rise again in the coming summer months.

Inflation rate eases to 6,1 percent in Germany

Monthly figures published by the Federal Statistical Office (Destatis) have revealed that inflation rates lay at 6,1 percent in May, down from 7,2 percent in April.

Analysts at the Business Data and Analytics company FactSet had initially forecast a rate of 6,4 percent for Germany in May 2023. Now, at 6,1 percent, prices remain high but the newest figures are the lowest overall inflation rate recorded in Germany since March 2022.

2022 and early 2023 saw the introduction of a number of government relief measures to cushion the blow of rising energy prices, such as one-off payments and the gas price cap. Now, the cost of energy has been lowered, but food shopping remains a greater financial burden than before supply chains were thrown into uncertainty by Vladimir Putin’s invasion of Ukraine.

In May, the cost of food shopping continued to rise faster than average compared to the same period in 2022, but has been easing during the first half of 2023, from 21,8 percent in February to 14,9 percent in May.

49-euro ticket policy encouraged inflation reduction

According to Destatis, Germany’s much-awaited 49-euro Deutschlandticket is partly to thank for the country’s reduced inflation rate. The ticket, which was launched on May 1 and grants subscribers unlimited travel on all regional and public transport across Germany for 49 euros per month, resulted in a “slight downward trend in the service sector” from 4,7 percent in April to 4,5 percent in May. Over 10 million people in Germany have now bought the ticket.

Looking at figures for each federal state, the impact of the 49-euro ticket launch is more easily recognisable. In North Rhine-Westphalia, prices for passenger transportation fell by 28,5 percent compared to the same period in 2022.

However, “In the coming months it will get more complicated,” Chief Eurozone Economist at ING, Carsten Brzeski told the dpa. In June, July and August “we [will] get base effects from the 9-euro ticket and fuel discounts [offered in 2022], which will increase inflationary pressure again”. Brzeski predicts rates will rise again to around 7 percent during the summer before falling to 4 percent this winter.

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