Germany: Harmonized inflation rises more than expected and moves further above target in December
Latest reading: Harmonized inflation rose to 2.9% in December from November’s 2.4%. December’s reading marked the highest rate since January, surprised markets on the upside, and outpaced both the ECB’s 2.0% target and the Euro area average of 2.4%. Looking at the details of the release, prices for food and non-alcoholic beverages were flat in December. However, prices for transportation were steady.
The trend pointed down mildly, with annual average harmonized inflation coming in at 2.5% in December (November: 2.6%). Meanwhile, consumer price inflation rose to 2.6% in December from the previous month’s 2.2%.
Finally, harmonized consumer prices rose 0.77% in December over the previous month, swinging from November’s 0.69% fall. December’s jump was the highest reading since March 2023.
Panelist insight: EU analysts commented:
“Moderating energy- and food-price inflation are the main drivers of the softer trend, with the lacklustre German economy constraining overall demand-pull inflation. Price pressures will generally be more persistent in the services sector (the hospitality sector in particular) underpinned by recent firm wage demands, although we expect lower negotiated wage agreements in 2025-26 amid a gradually weakening labour market. Scheduled increases in some public transport tariffs and insurance premiums may lift headline inflation slightly in early 2025. New barriers to trade driven by policies of the Trump presidency in the US will raise imported inflation in 2025-26, although the impact will be largely offset by domestic demand weakness.”