German inflation remained steady year-on-year at 2.8% in January, according to preliminary data from Destatis, the country’s statistics office. This data was released on Friday, marking the final reading before the upcoming German elections. The reported figure aligned with the forecast provided by economists surveyed by Reuters. The inflation rate is harmonized across the euro area to ensure comparability.
In terms of monthly changes, the harmonized consumer price index in Germany decreased by 0.2%. This marks the fourth consecutive month that Germany’s inflation rate has exceeded the European Central Bank’s 2% target, following a period below this threshold in September of the previous year.
The trend in Germany reflects the broader acceleration of inflation in the euro area. The European Central Bank recently stated that disinflation in the region is progressing as anticipated and is consistent with staff projections. In December, euro area inflation stood at 2.4%, with January’s figures set for release in the upcoming week.
The latest data revealed that German core inflation, excluding food and energy prices, was at 2.9% in January, a notable decrease from the 3.3% recorded in December. Additionally, services inflation slightly eased to 4% in January compared to the previous month’s 4.1%.
Economist Sebastian Becker from Deutsche Bank Research noted that Germany’s weak economy is contributing to a disinflationary effect. The preliminary data from Thursday indicated a 0.2% contraction in Germany’s economy during the fourth quarter of the previous year, surpassing expectations. Becker suggested that the services rate and core rate are likely to continue declining throughout the year, potentially prompting the European Central Bank to maintain its current monetary policy easing strategy.
The January inflation data represents one of the final significant economic indicators released before the German election on February 23, which was rescheduled following the collapse of the ruling coalition in November 2024. Economic concerns, including lackluster growth and rising inflation, have been prominent topics during the campaign.
The government recently revised its gross domestic product forecast for 2025 to 0.3%, reflecting the country’s economic challenges. Germany has experienced contraction in annual GDP over the past two years, with sluggish quarterly growth. Despite this, the economy has managed to avoid a technical recession characterized by two consecutive quarters of contraction. The government’s annual economic report predicts non-harmonized inflation to average 2.2% for the year.
