German inflation confirmed at 2.9%, highest since January 2024

German inflation reached 2.9% in April, official figures confirmed on Tuesday, as the war in Iran continued to drive up energy prices. 

The inflation rate has risen to its highest level since January 2024, the Federal Statistical Office said. 

"Overall inflation increased for the second consecutive month as a result of another rise in energy prices that was due to the Iran war," said the agency's president, Ruth Brand. "Consumers are particularly feeling the persistent price pressure regarding motor fuels."

Following the US-Israeli attack on Iran on February 28 and Tehran's subsequent blockade of the Strait of Hormuz, a key waterway for the global oil and gas trade, inflation in Germany shot up from 1.9% year-on-year in February to 2.7% in March. 

Compared to March, prices in April were 0.6% higher, the Wiesbaden-based authority said. 

Energy prices in April were up 10.1% year-on-year, with fuel prices up by 26.2% and light heating oil by 55.1%. In contrast, electricity costs were down 4.5, while district heating fell 1.1%. 

In response to the high energy prices, the German government has attempted to reduce costs for motorists with a temporary fuel rebate. 

The price surge has not yet been widespread for German consumers, said Silke Tober, inflation expert at the Institute for Macroeconomics and Economic Research (IMK) of the Hans Böckler Foundation. 

Inflation in services has fallen, she noted, and the rise in food prices has been moderate. “If the war in Iran is brought to an end and the Strait of Hormuz is opened in the coming weeks, the price of crude oil is likely to fall significantly, and with it inflation.”

However, as high energy costs are driving up production and transport costs for businesses, there is great concern that the war in Iran will affect the entire economy and cause prices for food and services to surge in the coming months.

According to data from the Munich-based ifo Institute, a growing number of German firms intend to raise prices, for example, in the catering and retail sectors.

Food prices up, package holidays down

Food prices rose slightly in April, up 1.2%, with sugar, jam, honey and other confectionery up 6.6% while chocolate surged 9.7%.

Meat and fruit also became more expensive, with both up 3.6%, while prices for cooking fats and oil fell sharply by 13.9%.

Services were 2.8% more expensive in April compared with the same month last year, with prices for vehicle maintenance and repairs up 5%, restaurant visits rising 3.2% and net rent excluding heating costs climbing 1.8%. Only a few services were cheaper, including package holidays (-3.5%).