Berlin (The Palestine Telegraph Newspaper) 30 January
2026 – Germany's annual inflation rate rose to 2.1 per cent in January 2026
from 1.8 per cent in December 2025, according to preliminary figures released
by the federal statistics office Destatis. The increase surpassed economist
expectations of 2.0 per cent and reflected higher food and services prices
despite falling energy costs. Core inflation, excluding food and energy, edged
up to 2.5 per cent from 2.4 per cent.
The data influences European Central Bank policy discussions
ahead of its March meeting. Destatis based the flash estimate on surveys across
650 regions.
Detailed Breakdown of Inflation Drivers
Food inflation accelerated sharply to 2.1 per cent from 0.8
per cent in December, driven by rises in fruits, vegetables, coffee, and meat
prices. Services costs increased 3.2 per cent, with public transport fares
contributing significantly. Energy prices fell 1.7 per cent year-on-year,
faster than December's 1.3 per cent decline, due to lower natural gas and
electricity costs.
Monthly consumer prices rose 0.4 per cent from December. The
harmonised index of consumer prices (HICP), relevant for ECB comparisons,
reached 2.2 per cent. Household surveys covering 700 goods and services
informed the calculations.
Economic Backdrop and Labour Market Pressures
Germany's economy showed resilience with 0.3 per cent GDP
growth in Q4 2025 after flat Q3 performance. Unemployment reached three
million, or 6.2 per cent of the workforce, up from prior months amid
manufacturing slowdowns.
ING Economics provided perspective on the mixed signals.
ING Economics said in X post,
“Germany's inflation rate has risen above 2%, and its unemployment number above three million - but is it all bad news? Here's our view on where things could be headed over the coming months.
Producer prices declined 0.8 per cent annually, easing
wholesale pressures. Wage agreements averaging 4.2 per cent in 2026
negotiations underpin services inflation forecasts.
European Central Bank Monitoring and Market Reactions
ECB deposit rate stands at 3.25 per cent following 100 basis points of reductions since June 2025. Markets anticipate a 25 basis point cut in March with 75 per cent probability. German data contributes 0.9 percentage points to eurozone HICP average.
The 10-year Bund yield rose to 2.17 per cent from 2.14 per cent. Euro appreciated 0.3 per cent to $1.0925 against the dollar. DAX index gained 0.1 per cent to close at 19,452 points.
Bundesbank President Joachim Nagel characterised the uptick
as temporary, projecting dips below 2 per cent later in 2026 assuming stable
oil prices around $75 per barrel.
Regional and Sectoral Price Variations
Bavaria recorded 2.0 per cent inflation, while eastern
states like Saxony hit 2.3 per cent due to higher heating demands.
Baden-Württemberg saw 2.1 per cent, North Rhine-Westphalia 2.0 per cent.
Petrol averaged €1.72 per litre, up 3.5 per cent monthly. Heating
oil rose 12 per cent quarterly. Grocery staples showed tomatoes up 15.2 per
cent, citrus fruits 9.8 per cent. Restaurant prices climbed 3.7 per cent
despite VAT reduction from 19 to 7 per cent, as businesses retained margins.
Rent inflation stayed capped at 2.0 per cent.
Pharmaceuticals fell 1.2 per cent on patent expiries. Tobacco duties added 0.3
points to headline inflation.
Government Fiscal Measures and Projections
Economy Minister Robert Habeck described the figures as
manageable, crediting the €200 billion energy relief package. Finance Ministry
forecasts 1.9 per cent average inflation for 2026 under debt brake compliance.
IFO business confidence dipped to 85.2 from 85.7, citing
input costs. ZEW expectations improved to 22.4, supported by US trade prospects
under President Trump. Government targets inflation below 2.0 per cent
long-term.
Comparisons Across Eurozone Neighbours
Eurozone HICP flash estimate stood at 2.0 per cent, up from 1.7 per cent. France reported 1.9 per cent, Italy 1.6 per cent, Spain 2.4 per cent. Dutch inflation reached 2.5 per cent, Austria 2.3 per cent.
UK CPI rose to 2.7 per cent. Poland faced 4.1 per cent amid food pressures. US PCE cooled to 2.4 per cent. Germany's energy import dependence contrasts with France's nuclear stability.
Renewables supplied 58 per cent of January electricity,
mitigating fossil fuel volatility.
Consumer and Business Impacts Observed
Verivox data indicated 15 million households secured cheaper
gas contracts last year, averaging €980 annually versus €1,450 spot rates.
Retailers Aldi and Lidl held prices steady for February, absorbing dairy
costs.
GfK consumer climate index rose to -18.5 from -19.2. Savings
rate declined to 10.8 per cent of disposable income. Automotive suppliers
encountered 2.5 per cent input inflation despite subdued electric vehicle
demand.
Methodological Aspects of Data Collection
Destatis employs a Laspeyres index with 2020 base year
basket. Annual weight updates derive from 60,000 household surveys. HICP
excludes owner-occupied rents, unlike national CPI.
Flash estimates carry 0.3 point error margin, refined in
final February release. December revised to 1.7 per cent from initial 1.8 per
cent. Full 2025 average reached 2.2 per cent national measure.
Historical Inflation Trajectory Reviewed
January's 2.1 per cent
represents the highest since March 2025's 2.3 per cent. 2022 peaked at 10.4
per cent from Ukraine energy shocks. Post-reunification average maintained 1.7
per cent near ECB target.
Core inflation exceeds 2 per cent for 17 months. Eurozone
projections align at 2.1 per cent for 2026.
Forecaster Outlooks and Risks Ahead
Commerzbank expects 1.9 per cent Q2 average via base
effects. Deutsche Bank highlights wage risks. Options markets favour ECB
easing. Industry anticipates stable Q1 costs barring Mideast disruptions.
IMF notes fiscal consolidation supports 1.5 per cent
potential growth with reforms.