German inflation shows continued rise, remaining above ECB’s target

The final figure for Germany’s year-on-year inflation rate for December has been confirmed as 2.6%, according to the Federal Statistical Office. That was in line with estimates and the third month in a row of inflation growth. It was also the highest figure since January 2024.  

December’s result was mainly boosted by services prices rising at a quicker pace, at 4.1%, from November’s 4%. Similarly, food prices increased to 2% in December, from 1.8% in the previous month. 

Energy prices fell at a slower rate in December, at -1.6%, down from -3.7% in November. 

The month-on-month inflation rate for December came in at 0.5%, up from -0.2% in November, as well as ahead of preliminary estimates of 0.4%. 

The annual average inflation rate for 2024 came up to 2.2%, a sharp fall from 2023’s 5.9%. Core inflation also dropped to 3% for the whole of 2024, down from 5.1% in 2023. 

German economy continues to struggle

Germany’s economy shrunk by 0.2% in 2024, following a 0.3% contraction in 2023, according to gross domestic product (GDP) figures released on Wednesday. 

This was mainly because of a fall in manufacturing output, which dropped -3% in 2024, primarily pulled down by the sluggish car manufacturing and machinery sector. The construction sector also declined 3.8% last year, mainly because of rising interest rates and soaring construction prices.

Household consumption, however, rose marginally, by 0.3% in 2024, largely boosted by transport and health spending increases.  

Both structural and cyclical pressures impacted economic growth in 2024, including surging competition for the German export industry’s most important markets. Higher energy costs, as well as ongoing geopolitical concerns also contributed to this situation.