The fuel discount may be criticized by some economists, but it appears to be slowing inflation in Germany. The Federal Statistical Office has confirmed preliminary figures that inflation was 2.8 percent in October. In September - when there was no fuel discount yet - the inflation rate was 3.3 percent.
“The development of energy prices remained the main reason for the continued high inflation rate, even if the fuel discount that was reintroduced at the beginning of October may have dampened inflation somewhat,” sums up the President of the Statistical Office, Ruth Brand.
Heating oil prices are skyrocketing
However, fuels remained a price driver in October, rising by 28.9 percent compared to the same month last year. Things got really tough for everyone who had to fill up with heating oil: heating oil prices shot up by 84.5 percent last month. The background is the Iran war and the supply difficulties with crude oil, natural gas and other important products.
However, there could be light at the end of the tunnel: "The significant decline in crude oil prices since the congressional elections in the USA could cause a further decline in inflation in November," says Silke Tober from the IMK Institute of the trade union-affiliated Hans Böckler Foundation - and puts it into perspective: "However, there has been little relief in diesel prices so far due to refinery bottlenecks and wholesale prices for natural gas remain very high."
Overall, energy prices rose by 12.2 percent in October compared to the previous year, after 14.9 percent in September. That was the biggest increase in more than three and a half years.
Eggs more expensive, butter cheaper
When shopping in the supermarket, consumers noticed the recent increase in prices for eggs, among other things. They cost 15.4 percent more in October than in the previous year. There was also an increase in fresh vegetables (plus 11.5 percent) as well as fish, fish products and seafood (plus 4.5 percent).
However, food was no longer the biggest price driver. On average, they cost 0.4 percent more than in the previous year. Butter, for example, became slightly cheaper. In October it cost 18.9 percent less than in the same period last year. The discount for dairy products was 4.7 percent and for fresh fruit it was 2.8 percent.
Core inflation is easing somewhat
Core inflation - i.e. the inflation rate excluding the volatile energy and food prices - fell slightly in October to 2.1 percent. In September it was 2.4 percent. Services rose by 2.5 percent compared to 2.7 percent in September.
“This is good news for consumers,” says chief economist Cyrus de la Rubia of Hamburg Commercial Bank. Things look different for companies: "From the companies' point of view, this means that their pricing power has decreased, and this is probably due to the still fragile economic situation."
Another relief program?
The fuel discount reintroduced by federal politicians is valid until the end of the year and could reduce fuel prices by up to 17 cents per liter. It had already been granted in May and June of this year.
The economist Veronika Grimm, for example, criticizes the fuel discount because it subsidizes the driving of combustion cars at the expense of the younger generation, while necessary structural reforms are a long time coming. It is also questionable whether the relief provided for by the policy will actually be passed on in full to consumers.
A fuel price cap could come into effect from next year. The government coalition of CDU, CSU and SPD is currently working on what exactly this should look like.
Interest rate hike is likely
Even if inflation has eased somewhat in Germany, it is still well above the central banks' target of two percent. Since inflation is high throughout the euro area, many economists expect the European Central Bank (ECB) to raise its key interest rate again in December, namely to 2.75 percent.
The ECB has already raised its key interest rate twice this year - to currently 2.50 percent.
