German Inflation Sticks Above 2% Despite Energy Drop: Services and Food Prices Drive Persistent Cost Pressure

The Federal Statistical Office in Wiesbaden announced on Wednesday that, despite a slowdown in the pace of increase, the cost of living in Germany remained elevated in October. The inflation rate stabilized at 2.3%, surpassing the European Central Bank's (ECB) target threshold of 2%.

Services Lead the Surge:

Statistical analysis indicates that consumers paid significantly more for services in October compared to the same month last year. Service prices have been rising above the general rate for months, climbing by 3.5%. This increase affects vital sectors such as travel and car repairs.

Certain services recorded sharp and notable increases:

Passenger Transport: Increased by 11.4%.

Services by Social Institutions: Rose by 8%.

Notable increases were also observed in hospital services and rents, which grew by an average of 2%.

Food and Energy: A Mixed Slowdown:

Although consumers in Germany still feel the impact of inflation in daily shopping, with many food items remaining much more expensive than before the pandemic, the food sector saw its price increase slow down for the third consecutive month, reaching 1.3% in October—the lowest rate since January 2025. While prices for oils, fats, and vegetables declined compared to last year, the price of coffee saw a shocking surge of 21.3%.

Conversely, energy prices registered a decline, with costs for fuel, electricity, and gas falling by 0.9% compared to the previous year.

Excluding volatile food and energy costs, the core inflation rate remained steady at 2.8%, confirming persistent inflationary pressures across the economy.

Economic Outlook:

Economists suggest that German consumers will have to live with inflation rates above 2% for the time being. The ECB aims to maintain price stability with a medium-term inflation rate of 2% to ensure the stability of the Euro in the Eurozone.

The current rate confirms that the major inflation wave following the Russia-Ukraine War (which peaked at 9% in October 2022) has indeed subsided. However, forecasts from Germany’s leading economic research institutes suggest that the inflation rate for Europe’s largest economy will settle at approximately 2.1% this year, very close to the 2024 rate of 2.2%.