Press release No.017 / 2009-01-15

Consumer prices in 2008: +2.6% on 2007

Price increase in December slowing down for the fifth month in a row

WIESBADEN – As reported by the Federal Statistical Office (Destatis), the consumer price index for Germany rose by 2.6% on an annual average in 2008 compared with 2007. That was the highest year-on-year rate of price increase in 14 years (1994: +2.8%). It was mainly due to the rather high inflation rates in the first half of 2008. In 2007, too, the rate of inflation (+2.3%) was above the threshold of two percent which is important for monetary policy, whereas in the previous two years, the rate of price increase was clearly below that level (2006: +1.6%; 2005: +1.5%).

The marked rise in the year-on-year rate of price increase in 2008 is characterised mainly by price rises for both energy and food. Energy product prices in 2008 were up 9.6% on the previous year and food prices were up 6.4%. So both product groups had a strong upward effect on prices on an annual average. Among all energy prices, prices of liquid fuel rose most strongly (+31.6%). For the other household energies, too, above-average price increases were recorded (including gas: +8.9%; electricity: +6.9%). Motor fuel prices increased by 6.8% in 2008 on the previous year (including Diesel fuel: +14.1%; supergrade petrol: +4.3%). Food price rises affecting consumers in 2008 concerned especially cereals, fats and dairy products (including pasta: +24.8%; margarine: +21.9%; sliced cheese: +19.3%).

Also, the accelerated price trend in 2008 is partly due to the VAT increase of January 2007, which in some cases was passed on to final consumers with a time lag of several months. In addition, the introduction of tuition fees in some Länder in April and October 2007 had an effect on the year-on-year price increase still in 2008, especially in education (+8.7%).

Altogether in 2008, above-average price rises were observed especially for consumer goods (+5.8%), while the increase in prices of goods with an average life was much smaller than that of total consumer prices (+0.8%; including clothing: +0.6%). Consumer-friendly year-on-year price trends were again recorded for consumer durables (−0.6%; including information processing equipment: −16.3%; consumer electronics: −10.2%). Price of services increased 1.6% in 2008 (including net rents: +1.3%; communication: −3.3%).

Changes in December 2008 on December 2007
In December 2008, the consumer price index was up 1.1% on December 2007. The rate of price increase slowed down markedly since August 2008, in December 2008 the inflation rate was below two percent for the second month in a row and, at the end of the year, reached the lowest level in more than two years (October 2006: +1.1%).

The sharply falling inflation rate in December 2008 is mainly characterised by the unusual price decreases for mineral oil products in the second half of the year; the reason were falling world market prices of crude oil. In a year-on-year comparison, mineral oil product prices were down 16.5% (of which liquid fuel: –21.4%; motor fuels: –14.9%) and hence had a strong downward effect on the price trend. Due to the strong decline in prices of mineral oil products, energy prices were down altogether 0.9% in December 2008 on a year earlier despite substantial price increases for gas (+22.5%), charges for central and remote heating (+16.2%) as well as electricity (+6.1%). Without considering mineral oil products, the inflation rate in December 2008 would have been markedly higher (+2.0%).

Food prices in December 2008 rose 2.1% on the same month a year earlier. Marked price increases were observed especially for confectionery (+6.9%; including chocolate slabs: +18.5%; honey: +11.6%). Price rises were also recorded for meat and meat products (+4.9%) as well as bread and cereals (+4.7%; including pasta: +17.7%; biscuits: +12.9%; bakery mixes: +9.3%). Considerable year-on-year price decreases were however observed for some dairy products (including curd: −20.1%; UHT milk: −15.7%) and butter (−27.8%).

Changes in December 2008 on November 2008
The 0.3% increase of the overall index in December 2008 on November 2008 was strikingly small at the end of the year. There were the usual seasonal price rises especially for vegetables (+5.5%) and package holidays (+19.8%), accommodation services (+22.1%) and air travels (+3.8%) because of the seasonal highlights (Christmas and New Year’s Eve). Rail fares, too, were up towards the end of the year because of the annual price changes (+3.9%). However, the price increase on the previous month was strongly reduced by the decreases in mineral oil product prices (−10.5%; of which liquid fuel: −20.4%; motor fuels: −7.3%), which were down for the fifth month in a row. There were some consumer-friendly price reductions such as for clothing and footwear (−1.1%) and some dairy products (including curd: −3.4%; UHT milk: −2.3%).

The harmonised consumer price index (HICP) for Germany, which is calculated for European purposes, rose 2.8% in an annual comparison in 2008. In December 2008, the harmonised consumer price index (HICP) was up 1.1% on December 2007. Compared with the previous month, the index climbed 0.4%.

The estimate of 30 December 2008 was thus confirmed both for the CPI and the HICP.

Further information on consumer price statistics is provided by Fachserie 17, Reihe 7, which is available free of charge via the publication service of the Federal Statistical Office at the Publications. Detailed information and long time series on consumer price statistics can also be retrieved free of charge from the database Genesis Online.

>>> Brief methodological description

Consumer price index for Germany
Overall index / product groups ________ Overall index / subindex	Weighting	2008 Annual average	December 2008
	Weighting	Change on 2007	Change on the same period a year earlier	Change on the preceding month
	in per mill	in per cent
Overall index 2008	1,000.00	2.6	1.1	0.3
Food and non-alcoholic-beverages	103.55	6.0	1.9	0.5
Food	89.99	6.4	2.1	0.6
Milk, cheese and eggs	14.44	14.0	–4.6	–1.0
Oils and fats	2.55	7.5	–6.0	–1.0
Alcoholic beverages and tobacco	38.99	1.9	2.0	–0.1
Clothing and footwear	48.88	0.7	0.7	–1.1
Housing, water, electricity, gas and other fuels	308.00	3.4	2.5	–0.5
Net rent exclusive of heating expenses	203.30	1.3	1.2	0.0
Household energy	59.82	11.2	7.2	–2.8
Electricity	24.61	6.9	6.1	0.1
Gas	12.85	8.9	22.5	0.1
Liquid fuel	9.21	31.6	–21.4	–20.4
Furnishings, household equipment and routine maintenance of the house	55.87	1.5	1.4	0.1
Health	40.27	1.7	1.9	0.1
Transport	131.90	3.4	–2.8	–1.7
Motor fuels	35.37	6.8	–14.9	–7.3
Supergrade petrol	19.29	4.3	–15.2	–6.6
Diesel oil	8.15	14.1	–14.4	–9.4
Communication	31.00	–3.3	–3.3	–0.2
Recreation and culture	115.68	0.0	1.2	4.5
Education	7.40	8.7	–3.8	0.0
Restaurants and hotels	43.99	2.2	2.6	5.6
Miscellaneous goods and services	74.47	2.1	1.7	0.0
Overall index
Excluding liquid fuel and motor fuels	955.42	2.2	2.0	0.8
Excluding household energy	940.18	2.0	0.7	0.6
Excluding energy (household energy and motor fuels)	904.81	1.8	1.3	0.9
Goods, total	493.00	3.7	0.8	–0.8
Non-durable consumer goods	305.11	5.8	1.0	–1.2
Consumer goods with a medium-term life	95.24	0.8	0.9	–0.4
Durable consumer goods	92.65	–0.6	–0.5	–0.1
Services	507.00	1.6	1.6	1.5

Consumer price index for Germany
Overall index ________ Year / Month		Index 2005 = 100	Change on the same period a year earlier	Change on the preceding month
Overall index ________ Year / Month		Index 2005 = 100	in per cent
Overall index in December2008		106.8	1.1	0.3
2007 Annual average		103.9	2.3	–
2008 Annual average		106.6	2.6	–
2007	December	105.6	3.1	0.6
2008	January	105.3	2.8	–0.3
	February	105.8	2.8	0.5
	March	106.3	3.1	0.5
	April	106.1	2.4	–0.2
	May	106.7	3.0	0.6
	June	107.0	3.3	0.3
	July	107.6	3.3	0.6
	August	107.3	3.1	–0.3
	September	107.2	2.9	–0.1
	October	107.0	2.4	–0.2
	November	106.5	1.4	–0.5
	December	106.8	1.1	0.3

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