ZEW Economist Friedrich Heinemann on the Inflation Figure // “Decline in Purchasing Power Prevents Recovery of Private Consumption” (August 2023)

"Decline in Purchasing Power Prevents Recovery of Private Consumption" (August 2023)

ZEW economist Friedrich Heinemann comments on the development of the German inflation rate in January 2023.

The Federal Statistical Office published its preliminary results on the development of the German inflation rate in August 2023. According to the calculations, the inflation rate measured by the German consumer price index fell only slightly, from 6.2 per cent to 6.1 per cent. Friedrich Heinemann, head of Research Unit "Corporate Taxation and Public Finance" at ZEW Mannheim and professor at Heidelberg University, has commented on this matter:

"Inflation in Germany is proving to be persistent. The slight decrease during the summer is disappointing. The expected decrease in the core inflation rate, which excludes energy and food, has not materialised at all. This can be attributed to the enduringly high inflationary pressure driven by wages within Germany. This is also evident in the detailed analysis of the inflation data. While food and energy prices are gradually decreasing again, Germany's households are still facing unabatedly high price increases in other goods, and especially services. Inflation is currently even in double digits for services like handyman work, package holidays, or the costs of nursing homes. Consequently, the decline in purchasing power tangibly affects the majority, prominently evident and perpetuating a sense of uncertainty regarding dwindling prosperity. Such a development undermines the notion that private consumption could promptly underpin economic resurgence."