Energy drives inflation: Inflation rises for the first time since the end of 2023 above three percent

Record gas prices have made life in Germany significantly more expensive in September, for the first time since late 2023. Inflation rose to 3.3 percent, according to preliminary figures from the Federal Statistical Office. Consumer prices had previously peaked in December 2023 at 3.7 percent. Over the course of September, consumer prices increased by 0.6 percent.

The Iran conflict and Houthi militia advances in Yemen have caused significant concerns over global oil supply. Brent oil prices briefly surged past 100 dollars per barrel, leading to record-high prices at German petrol stations for E10 and diesel. Overall, Germans paid 14.9 percent more in September for fuel and household energy compared to the previous year.

Food prices increased by only 0.4 percent, with a slight uptick in the price surge. Services, such as package holidays and restaurant visits, rose by 2.7 percent, even less than the previous months. Companies are likely to pass on higher energy prices. Since the start of the Iran war at the end of February, expensive energy, including heating oil, has driven inflation significantly upwards.

Inflation in Germany was already at 2.9 percent in August. The longer energy prices remain high, the greater the risk of other prices rising, as transportation and food cooling become more expensive. Import prices, which take time to affect consumer prices, also increased by a whopping 8 percent in August, the highest level since late 2022.

The Ifo Institute expects companies to increasingly pass on higher energy prices to consumers. "Gas and heating oil have already become noticeably more expensive, and in winter, power and gas suppliers are expected to raise prices," says Ifo Chief Economist Timo Wollmershäuser.