- Q1 GDP Growth Jumps 1.1% on Strong Personal Consumption
- A Strong March Leads to a Surge in Chinese GDP in Q1 2023
- Durable Goods Retail Sales Suffer from High Interest Rates and Wary Consumers
- Choppy GDP Means UK Should Avoid Q1 Recession
- Japanese Consumer Confidence Jumps to Highest Level in Over a Year
- The End of Summer Sees the End of Disinflation in Europe
- Labor Market Indicators are Starting to Unify on Easing in Hiring
- Inflation and Tight Financial Conditions Weigh on the German Consumer
- Euro Area Money Supply Contracts for the First Time Since 2010
- Dismal Economic Data Out of Germany
- Core Durable Goods New Orders See Gentle Uptrend in July
- More UK Data Pointing to Q3 Decline
- Whispers of a UK Contraction in Q3
- Japan's Core Inflation Resumes Uptrend in July
- Early July Economic Data Leads to a Sharp Increase in Q3 Growth Expectations
- UK CPI: Energy Inflation Crashes but Services Inflation is Still Sticky
- China's Weak Start to Q3 Means More PBoC Easing
- A Breather for the Eurozone as Inflation Hits Two-Year Low
- Germany's September CPI Report: A Clearer Picture of Inflation Trends
- US Manufacturing Demonstrates Resilience Amidst Volatility in August
- The ECB Prepares to Address Excess Liquidity Through the MRR
- Bank of Japan is Too Optimistic on Inflation
- The Bank of England Pauses in a Near Split Decision
- UK Inflation August Update: A Precursor to the Bank of England's Announcement
- Housing Starts Tumble in August Amid Rising Mortgage Rates
- US Retail Sales Grow at Fastest Monthly Rate Since the Start of the Year
- US Consumer Prices Surge in August Driven by Energy Costs
- August NFIB Survey Showed a Tough Environment for Small Businesses
- All Signs Point to a Weaker Labor Market in August
- Chinese CPI Trying to Buck the Deflation Trend
- Energy Prices Rise but the Core Disinflationary Trend is Maintained in September
- PPI's Quiet Rise and the Energy Elephant in the Room
- Small Businesses Grapple with Inflation and Financial Strain in September
- A Wacky September Jobs Report Shows Strong Labor Market
- A Look at the Fragile US Labor Market Ahead of the Nonfarm Payrolls Report
- Thoughts on GME and This Week in the Stock Market
- Record Home Price Levels Point to Strength in Post-Pandemic Economy
- The Stock Market Looks Overvalued, but It's Probably Not
- China GDP Growth Surpasses Expectations
- President-elect Joe Biden Introduces His "American Rescue Plan"
- Political Polarization Intensifies with Another Impeachment Along Party Lines
- Metal Demand Has a Bright Future in 2021 and Beyond
- What Happened to That US-China Trade Dispute?
- Civil Unrest, A Rising Threat to the 2021 Economy
- What's in the $900 Billion Relief Plan?
Germany's September CPI Report: A Clearer Picture of Inflation Trends
September 28, 2023
Germany’s inflation rate sees a strong deceleration in September thanks to some base effect magic. The CPI was up 0.3% MoM and 4.5% YoY in September, down from 6.1% YoY in August. The slowdown in the annual rate can be attributed to the discontinuation of the German government’s final inflation relief measures including the fuel discount which impacted energy prices and the 9-euro ticket which impacted services prices. Regardless of that, it is notable that this annual increase in headline CPI inflation is the lowest since February 2022 when it was 4.3% YoY.
The discontinuation of the fuel discount relief program last year led to a significant surge in energy prices. As a result, September 2023’s energy CPI inflation has cooled down considerably. From a high 8.3% YoY in the previous report, it plummeted to just 1.0% YoY. This figure now offers a more accurate reflection of the oil and gas price situation, devoid of any distortions caused by government price controls. Unlike energy, food CPI wasn't influenced by the 2022 government relief measures. Yet, it too experienced a slowdown this month. From 13.7% YoY at the start of the summer, it dropped to 9.0% YoY a month ago and now stands at 7.5% YoY. Food inflation has been on a downtrend in 2023 which will likely continue through the end of the year.
Core CPI, which excludes food and energy, also felt the ripple effects of the expiration of government relief measures. It slowed down to 4.6% YoY in September, a drop from the 5.5% YoY recorded in both July and August. Goods prices, influenced by fuel prices, are still up by 5.0% YoY, but this is a significant decrease from the 7.1% YoY of the previous month. However, the most notable revelation from the report is the significant deceleration in services inflation. It dropped by 1.1 percentage points to 4.0% YoY, finally breaking below the 5% threshold where it had been lingering for a while.
Germany's CPI readings had been skewed for a considerable period due to the government relief packages introduced as a countermeasure to inflation. Now, with those distortions out of the picture, two main observations emerge:
- Germany's services inflation is currently lower than the overall euro area rate. This suggests that the upcoming Eurostat inflation report will show a significant deceleration in services inflation for the whole euro area, a measure closely followed by the ECB.
- Germany's goods inflation, which does include energy and food, stands high at 5.0% YoY. It's not often that we see the goods annual rate surpass the services annual rate these days, but in Germany, this is the case.
One thing that is distorted in this report is how much of the deceleration in the inflation rates across all categories are attributed to the relief package and how much is a result of tighter financial conditions. That means that the monthly rates, which are reported in the final version of the Destatis inflation report, are especially important for September.