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US, German inflation rates sink slightly

August 10, 2022

Inflation in the US is down from a four-decade high, and Germany's rate sank slightly in July. However, an end to fuel and transport assistance in Germany could exacerbate inflation in September.

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US dollars and euros
Despite slight easing, inflation remains high in both the US and GermanyImage: Mykola Tys/picture alliance

Data released in Germany and the US on Wednesday showed inflation easing slightly in July, although price pressure on consumers in both countries continues as governments and central banks try and put the brakes on soaring costs

In Germany, inflation dipped slightly to 7.5% in July, compared with 7.6% seen in June, according to the German Federal Statistical Office, Destatis. The leveling-off was attributed to a discount on fuel prices and the "9-euro-ticket," allowing low-cost rail travel.

High energy and food costs , driven both by the war in Ukraine and supply bottlenecks, continue to be the driving forces of inflation in Germany. Excluding these factors, German inflation in July would have been at 3.2%, according to Destatis. 

In the US, the Consumer Price Index (CPI), a broad measure of the cost of goods and services, rose less than expected in July to an annual rate of 8.5%, meaning that the prices were on average 8.5% higher than last year. That's a step down from the four-decade high of 9.1% recorded in June. The drop in the US has been attributed to falling gas prices. 

US President Joe Biden said after the data was released that there are signs "inflation is beginning to moderate." Biden has credited his administration's policies with easing burdens on US households while increasing employment. 

 In the upcoming midterm Congressional elections, high inflation remains a top issue as Biden's approval ratings have sunk sharply. 

What is inflation?

German inflation relief temporary? 

In Germany, both the 9-euro-ticket and fuel price relief are set to expire at the end of August, potentially exacerbating inflationary pressure. 

Sebastian Dullien, an economist at Germany's Hans Böckler Foundation, said inflation in Germany was expected to accelerate again in September.

"Overall, the inflation rate could reach the 10% mark in the winter...The need to further target relief for private households, even with non-conventional measures should be of utmost priority," he told AFP news agency. 

However, the ifo institute, a leading German economic research think tank, predicted in late July that inflation in Germany had already peaked, and would continue to fall in the second half of 2022.

German Finance Minister Christian Lindner on Wednesday announced a plan to soften the blow of high prices by increasing tax cuts. According to his plan, tax progression will be eased and child benefits increased.

The Federal Reserve bank in the US and the European Central Bank have both adopted interest rate hikes in recent months to battle inflation. 

los/wmr (AFP, AP, Reuters, dpa)