German inflation surges in March

German inflation surged in March to its highest level since 1981 amid soaring energy prices, according to preliminary data released by Destatis on Wednesday.

Consumer prices jumped 7.3% on the same month a year earlier, up from 5.1% in February and versus expectations of 6.3%.

Destatis said: "Since Russia’s attack on Ukraine, the prices of natural gas and mineral oil products have markedly increased again and have had a considerable impact on the high rate of inflation. A similarly high inflation rate in Germany was last recorded in autumn 1981 when mineral oil prices had sharply increased, too, as a consequence of the first Gulf war.

"Additional factors in the current reference month are delivery bottlenecks due to interruptions in supply chains caused by the Covid-19 pandemic and the marked increases in energy product prices at upstream stages in the economic process."

ING economist Carsten Brzeski said: "Looking ahead, with the war in Ukraine and continued tension and upward pressure on energy, commodity and food prices, headline inflation in Germany will accelerate further in the coming months. The pass-through to all kinds of sectors is in full swing. Add to this the additional price mark-ups in the hospitality, culture and leisure sectors once the current round of restrictions is over and it is hard to see inflation coming down significantly any time soon.

"Against the backdrop of recent geopolitical events, we now expect German inflation to average at more than 8% this year with a chance that monthly inflation rates will enter double-digit territory in the summer."