Higher gas prices have been passed on to most German households with the start of the new year. Based on personal anecdotal evidence, all kinds of administrative prices and even TV broadcasting prices have gone up. Add to this additional price-markups 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.
It will take until late summer to see inflation slowing down to any significant degree, when lockdown-related price markups are over and negative energy price base effects kick in.
The year 2021 brought Germany the worst inflation surge since the early 1990s. Today’s inflation numbers should, in our view, mark the peak of the inflation surge. However, inflation is unlikely to come down in a straight line from here. Instead, inflationary pressures will first broaden further across sectors and goods before abating towards the end of the year.
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