Germany's consumer price index fell in line with forecasts

According to the report from Federal Statistical Office (Destatis), the inflation rate in Germany, measured as the year-on-year change in the consumer price index, stood at -0.1% in July 2020. This means that the inflation rate declined in July 2020 (June 2020: +0.9%). Destatis also reports that consumer prices decreased by 0.5% compared with June 2020.

The prices of goods (total) decreased by 1.4% from July 2019 to July 2020. The value added tax cut was probably one of the causes. At -6.7%, the fall of energy prices accelerated slightly year on year (June 2020: -6.2%) although oil prices are on the rise again in the world market. A price decline was recorded especially for heating oil (-31.3%) and motor fuels (-12.9%). Electricity prices rose by merely 2.1% (June 2020: +4.1%). Food prices were up by 1.2% compared with a year earlier, with the price increase slowing markedly as well (June 2020: +4.4%). However, above-average price increases were again recorded for fruit (+7.8%), meat and meat products (+5.4%), while the prices of edible fats and oils were down (-3.4%). Owing, among others, to the VAT reduction, there were falling prices in other groups of goods as well, for example clothing and footwear (-1.7%) and durable consumer goods (-1.0%). There were considerable price rises for tobacco products (+6.6%), which are exempt from the VAT cut.

The year-on-year decrease in energy product prices continued to have a downward effect on the inflation rate. Excluding energy product prices, the inflation rate would have been +0.8% in July 2020; excluding the prices of energy products and food, it would have been +0.7%.