Falling Energy Prices Tame Inflation, Food Costs Remain High
The latest inflation numbers are in, and they're a breath of fresh air. According to Ruth Brand, President of the Federal Statistical Office, the inflation rate in November 2023 dropped significantly. This decrease was primarily due to a plunge in energy prices, which had skyrocketed following Russia's attack on Ukraine.
Energy products saw a 4.5% decrease in price year-on-year, with notable drops in light heating oil (-19.4%), natural gas (-18.3%), and fuels (-6.9%). Unfortunately, electricity prices bucked this trend, increasing by 1.6% compared to the previous year.
While the inflation rate is down, food prices continue to drive the market. According to Brand, annual food inflation has weakened but remains higher than the overall inflation rate. Food prices rose an average of 5.5% year-on-year, with notable increases in fruit (12.0%), sugar, jam, honey, and confectionery (11.9%), bread, vegetables, fish, and meat. Edible fats and oils, including butter and rapeseed oil, saw a decrease in price, but olive oil spiked massively (43.5%).
Sebastian Dullien, Scientific Director of the Hans Böckler Foundation's Institute for Macroeconomics and Business Cycle Research (IMK), observed that inflationary pressure is easing across the board. However, energy prices remain a potential factor in future price increases. Dullien highlighted that government policies and tax reductions, such as energy price brakes and VAT reductions in the catering sector, are set to expire at the turn of the year. This could potentially lead to a surge in inflation in the first half of 2024.
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The reduction in inflation was due to several factors, predominantly in the energy and food sectors.
- Lower gasoline and fuel oil prices: Gasoline prices plummeted by -8.1%, and fuel oil prices dropped by -19.5%.
- Moderate natural gas price increase: Natural gas prices showed a moderate increase of only 1.8%, but still exhibited a smaller change compared to other energy components.
- Food price slowdown: Food prices accelerated at a slower rate, with an annual increase of 2.4%, contributing less to the overall inflation rate.
- Base effects and global market trends: Decreasing energy prices were also influenced by low base effects from the previous year and a 2.3% reduction in oil prices in international markets.
Note: The enrichment data has been integrated into the base article to maintain a cohesive and informative piece.
