Germany's consumer price index rose in line with forecasts in December

According to the report from the Federal Statistical Office (Destatis), consumer prices in Germany rose by 0.5% on an annual average in 2020 compared with 2019. The increase was markedly below the relevant level in the previous year (2019: +1.4%). Destatis also reports that a lower annual rate of price increase was last measured in 2009 during the financial and economic crisis (+0.3%). In December 2020, the inflation rate, measured as the year-on-year change in the consumer price index, stood at -0.3%. This was the fifth time that the rate was negative in 2020.

One of the reasons for the low annual rate of price increase was the temporary value added tax reduction. This measure of the Federal Government's stimulus package was implemented on 1 July 2020. It had a downward impact on the consumer prices as a whole and differing effects on the individual groups of products in the second half of 2020.

The prices of energy products were markedly down by 4.8% in 2020 year on year, following a 1.4% rise in 2019. Declining prices were especially recorded for heating oil (-25.9%) and motor fuels (-9.9%).

Food prices rose above average in 2020 compared with 2019 (+2.4%). The price increase slowed during the year when the value added tax rates were reduced. 

In 2020 the prices of goods (total) were down by 0.4% on 2019. The prices of services (total) rose above average by 1.3% (including net rent exclusive of heating expenses: +1.4%) on an annual average in 2020 compared with 2019.