German inflation in July exceeds 3 per cent for first time since 2008

Wiesbaden, Germany (dpa) – Rising energy prices and an increase in value-added tax rates pushed inflation in Germany above the 3-per-cent mark in July for the first time since August 2008, the Federal Statistical Office announced on Thursday.

Consumer prices were 3.8 per cent above the level of the same month last year, the office announced on the basis of a preliminary calculation.

This was the first time since August 2008 that the annual inflation rate in Europe’s largest economy was above the 3-per-cent mark. During the financial and economic crisis at the time, inflation repeatedly exceeded 3 per cent.

On a month-on-month basis, prices rose by 0.9 per cent from June to July.

Economists are predicting further rises in the months ahead, in large part as a result of a restoration of the higher value-added tax rates. In response to falling demand during the coronavirus pandemic, the government cut its VAT rates to 16 and 5 per cent in the second half of 2020, from previously 19 and 7 per cent.

The earlier rates were restored at the beginning of the year.

Energy prices are another major factor. Crude oil prices collapsed in early 2020, hitting a low in April. Energy prices have been rising faster than the general average for months now. In addition, consumers burning fossil fuels have had to pay 25 euros (29.70 dollars) per ton of CO2 emitted since January.