Germany’s inflation rate rose to 2.9% in December, surpassing the 2.6% forecast by analysts polled by Reuters, according to preliminary data from Destatis.
This marks the third consecutive month inflation has exceeded the European Central Bank’s 2% target, with energy prices and wages driving the increase.
The harmonized consumer price index, which allows comparisons across the eurozone, climbed 0.7% month-on-month.
Core inflation, excluding food and energy, nudged up to 3.1% from November’s 3%. Services inflation also rose slightly to 4.1%, compared to 4% the previous month.
Carsten Brzeski, global head of macro at ING, remarked that optimism over overcoming inflation had been premature, emphasizing that “less favorable energy base effects” were the primary factor behind the resurgence.
He also noted that inflation’s persistence at “slightly too high a level” is likely to continue as energy effects fade and wages rise.
This economic data coincides with Germany’s political uncertainty following the dissolution of its government in November.
The collapse of the ruling coalition, spurred by Chancellor Olaf Scholz’s dismissal of former Finance Minister Christian Lindner, has set the stage for early elections on February 23.
For businesses navigating these turbulent times, inflation and political instability create a complex backdrop for decision-making.
Germany’s road to stability remains uncertain, with both economic and political challenges ahead.
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