Last month, inflation in Germany accelerated to an annual rate of 9.3 percent, up from 8.3 percent in January, the government’s statistics office reported.

Prices of energy and food drove the increase, rising at a yearly pace of 19.1 percent and 21.8 percent, respectively, despite government aid programs that focused on easing the bite of higher energy prices on households and businesses.

“The inflation rate may fall in coming months because energy prices are unlikely to rise as strongly as they did in spring 2022,” Ralph Solveen, a Commerzbank economist, told Reuters. 

However, “this does not mean inflation is over,” he cautioned.

Inflation also sped up last month in France and Spain, where food and energy costs also bit deeper in households’ and companies’ budgets.

Economists expect inflation to continue to rise in the months ahead, prompting the European Central Bank to keep raising its key interest rate, according to Reuters.

The bank has signaled a half-point rate bump next month, lifting it from 2.5 percent to 3 percent.

TREND FORECAST: Germany’s economy contracted in the final quarter of 2022, as we reported in “German Economy Contracts in Fourth Quarter, Stoking Recession Fears” (28 Feb 2023).

A contracting economy burdened by rising prices defines Dragflation, one of our top trends in 2022.

Germany is the Eurozone’s largest economy and one of its most troubled. Because it seems unable to control inflation and is still losing industrial production to the region’s lingering natural gas crisis, Europe’s economy as a whole will recover only slowly from its current economic malaise.