BERLIN, Aug. 30 (Xinhua) -- Inflation in Germany took a bigger dip than expected in August, with the European Union (EU)'s statistical office reporting a rate of 2 percent on Friday. The overall inflation in the eurozone was 0.2 percentage points higher.
The data aligns with preliminary figures released by Destatis, Germany's statistics office, on Thursday. According to Destatis, Germany's inflation rate dropped from 2.3 percent in July to 1.9 percent in August, marking the lowest level since March 2021 and the first time it has been below 2 percent since then.
Economics have previously forecasted that the August consumer price index in Europe's largest economy would increase by 2.3 percent year-on-year.
This decline was largely driven by a significant drop in energy prices, which had been high a year ago. In contrast, services prices increased by 3.9 percent year-on-year, casting doubt on the likelihood of a further decrease in Germany's core inflation, which excludes energy and food prices. Core inflation remained at 2.8 percent in August.
A survey released by the ifo Institute for Economic Research on Thursday also indicated a downward trend in overall consumer prices. According to the Munich-based think tank, fewer companies in Germany are planning to raise their prices, with the related expectations index falling in August.
Timo Wollmershaeuser, an ifo expert, anticipated Germany's inflation rate to remain below 2 percent in the coming months, due partly to considerably lower energy prices. However, he cautioned that the price increase for all other goods and services, or core inflation, is likely to remain steady at around 2.5 percent in the short term.
The ifo survey showed that price expectations for consumer-related services, in particular in the hospitality sector, rose largely in August.
Despite a persistent loss of German consumers' purchasing power in the wake of waves of inflation, continued wage increases have partially offset the impact. Driven by strong nominal wage growth and relatively lower rises in consumer prices, real wages in Germany increased for the fifth consecutive quarter from April to June, Destatis reported on Thursday. Compared to a year ago, real wages were 3.1 percent higher in the second quarter of the year.
"Inflation is falling, and real wages are rising for the fifth quarter in a row," German Chancellor Olaf Scholz said on social media platform X on Thursday, noting that people have more money in their pockets.
However, Carsten Brzeski, global head of Marco division of ING Research, expressed concerns about forward-looking inflation indicators like price expectations and real wage growth. He said in a note that the wage increases may intensify inflationary pressures, adding that inflation in Germany is likely to hover between 2 percent and 3 percent.
Meanwhile, real wage growth has failed to boost private consumption in Germany, a key factor hindering its economic recovery. Data from Destatis shows that household consumption expenditure decreased by 0.2 percent in the second quarter compared to the previous three months.
Consumer sentiment in Germany suffered a severe setback in August, following a considerable recovery in the previous month, according to a monthly index by market research institute GfK. The decline was primarily driven by large reductions in income and economic expectations among the 2,000 consumers surveyed.
"It seems that the euphoria that the European Championship triggered in Germany was only a brief flare-up and disappeared after the end of the tournament," said Rolf Buerkl, an expert on the survey. He noted that a slight increase in unemployment, along with increases in company insolvencies and layoffs, has heightened consumer concerns.
According to Germany's Federal Employment Agency, the unemployment rate rose slightly to 6.1 percent in August, meaning 2.87 million people out of work. The agency noted that the country's labor market continues to be affected by economic stagnation.
