Germany reaches highest level of inflation

The temporary reduction of value added tax (VAT) and the sharp decline in mineral oil product prices last year had an “upward effect on the overall inflation rate”

Inflation in Germany continued to rise and climbed from 4.5 per cent in October to 5.2 per cent in November, the highest rate registered in the country since June 1992, the Federal Statistical Office (Destatis) said. “The inflation rate increased for the sixth time in a row and in November reached the highest level recorded in 2021 so far,” said Georg Thiel, president of Destatis. Price development in recent months was driven by “base effects due to low prices in 2020,” Destatis noted.

The temporary reduction of value added tax (VAT) and the sharp decline in mineral oil product prices last year had an “upward effect on the overall inflation rate.” When presenting its annual report, the German Council of Economic Experts (GCEE), an official advisory body to the German government, noted that the “sharp rise in global demand has led to high commodity and energy prices and supply shortages.” 

GCEE expects an inflation rate in Germany of 3.1 per cent for 2021 and 2.6 per cent for 2022. The introduction of a CO2 pricing in the transport and housing sectors at the beginning of the year, with a charge of 25 euros ($28) per tonne of carbon dioxide emitted, further fuelled inflation in Germany, according to Destatis. Prices of goods  increased above-average with 7.9 per cent in November, according to Destatis.

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