The fight against inflation in Germany suffered a setback as the inflation rate rose in May due to significantly higher prices for services. Consumer prices increased by 2.4 percent compared to the same month last year, marking the first increase in inflation rate this year, as confirmed by the Federal Statistical Office on Wednesday.
In March and April, the inflation rate was at 2.2 percent each, the lowest level in around three years. One of the reasons for the rise in inflation was the introduction of the Germany ticket for local transport, priced at 49 euros per month, in May 2023. This led to a price increase in combined tickets for trains, buses, and similar services by 3.5 percent. Services were identified as the primary driver of price increases, with prices rising by 3.9 percent compared to a year earlier.
The rising prices for services were attributed to sharply increasing wages, which in turn drove up the prices of labor-intensive services such as insurance (which rose by 13 percent), social services (which increased by 7.7 percent), and restaurants (with prices up by 6.9 percent). Package holidays also saw a noticeable increase of 5.6 percent during that time period. On another hand, energy costs decreased by 11% compared to a year earlier as firewood became cheaper while electricity and natural gas became cheaper too however food cost slightly higher at .6% compared to last year with dairy products falling in price but fresh vegetables became cheaper.
The European Central Bank (ECB) has set a target inflation rate of two percent for the monetary union despite the inflation rate rising to 2
