German August CPI eases to 6.1% but energy, food still surging

German inflation eased to 6.1% in August - confirming initial readings - as elevated food and energy prices continued to outstrip the overall rate, according to official data released on Friday.

The reading compared with July's 6.1%. On a harmonised basis CPI rose 6.4% year on year, also confirming the provisional result.

Core inflation, which strips out volatile food and energy prices, was unchanged at 5.5%, demonstrating that inflation also remained high in other product groups.

“Increases in energy and food prices exceed overall inflation and keep the inflation rate high. The base effect stemming from last year’s €9 (rail) travel ticket was also apparent in August, when it drove inflation up and reduced the dampening effect of the Germany ticket on prices. This base effect will cease to apply from the next month onwards.”

Energy product prices in August were 8.3% higher than in the same month a year earlier, following a 5.7% increase in July 2023. Electricity, in particular, cost substantially more, rising 16.6% annually.

Food prices rose 9%, slowing from 11% in July, although increases in many food groups remained "markedly higher than overall inflation".

"In particular, consumers had to pay much more for sugar, jam, honey and other confectionery (up 17.1%). There were also considerable year-on-year price increases for bread and cereals (+13.6%), vegetables (+12.4%) and fish, fish products and seafood (+11.5%). By contrast, edible fats and oils cost 13.9% less than a year earlier," the statistics office said.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics said: "Services inflation dipped, but remains elevated overall at just over 5%, reflecting in part base effects from last year’s temporarily-reduced rail fare."

"These base effects will disappear in the September report, which should drive a significant decline in core inflation this month. This is another key reason why we think that the window for further monetary policy tightening will close after next week’s ECB meeting—where we expect a 25 basis point hike—no matter what the central bank decides."

Reporting by Frank Prenesti for Sharecast.com