Consumer prices rose by an annual average of only 0.5%
The increase in consumer prices in Germany slowed significantly in the corona crisis year 2020. According to preliminary data from the Federal Statistical Office on Wednesday, the annual average inflation rate was 0.5 percent. The average for 2019 was 1.4 percent. A rate of 0.5 percent was last measured in 2016. In particular, the sharp fall in energy prices and the temporary VAT cut dampened developments in the past year.
According to preliminary data, consumer prices in December were 0.3 percent below the level of the same month last year. Compared to November, they rose by 0.5 percent.
With the corona crisis and the global economic downturn, crude oil prices collapsed on world markets, which was reflected in lower energy prices. From July until the end of 2020, lower VAT rates also applied in Germany. The German federal government temporarily lowered the tax from 19 to 16 percent. The German government wanted to boost consumption as an important pillar of the economy in the corona crisis. However, dealers and service providers were free to decide whether and how they would pass the relief on to consumers.
For the European Central Bank (ECB), falling prices in the largest economy in the currency union are a problem, as it is aiming for an inflation rate of just under two percent in the euro area.
