In Germany, inflation was recorded at the 2.3% mark in March, which is lower than previously expected.
The mentioned information was published by the specified country’s statistics office Destatis on Monday, March 31.
In February, inflation in Germany was 2.6%. Experts interviewed by the media predicted that this figure in March would be fixed at the 2.4% mark.
On a monthly basis, harmonized inflation in Germany increased by 0.4%. Core inflation, which excludes food and energy costs, reached 2.5%. The February figure was recorded at the 2.7% mark.
Services inflation, which has remained sticky in Germany for a long time, was 3.4% in March. In February, this figure was recorded at the 3.8% mark.
The inflation data was released at a time when Berlin was facing a difficult economic situation. Moreover, in this case, there are not the most favorable prospects for Germany. Tariffs from the United States are looming to the European Union. Against this background, there is a high probability that Germany will have to make certain changes in fiscal and economic policy, some of which will be painful.
The German economic system relies heavily on trade. For this reason, the mentioned system is characterized by a high level of vulnerability to uncertainty and rapidly changing developments, currently dominating the global trade space.
Several levies from the United States are expected to take effect this week, including 25% tariffs on car imports. The production of vehicles is one of the main segments of the German economic system. The mentioned circumstance means that for Berlin, 25% US tariffs on car imports will have negative consequences. German political leaders and representatives of the automotive industry have already criticized the plans of the President of the United States Donald Trump to tighten trade policy measures.
Carsten Brzeski, global head of macro at ING, said it was still unclear what impact the trade conflict would have on inflation. According to the expert, the looming escalation of trade tensions and possible European retaliation to US tariffs may raise inflationary pressure in the short term. At the same time, Carsten Brzeski noted that any trade war in the long term could become a disinflationary force for Germany and the eurozone, if economic growth slows down, companies may have to sell their increased inventories. The expert also stated that goods that were originally produced for the United States market may eventually be sold in Europe at a reduced price point.
Germany’s political parties are currently working on forming a new coalition government based on the results of the federal elections that were held last month. Negotiations are underway between the Christian Democratic Union, alongside its sister party the Christian Social Union, and the Social Democratic Union. According to the media, there are still certain disagreements between the participants in this process, which at the same time have not become a barrier to achieving some positive results. This month, German lawmakers voted for a major fiscal package, which included amendments to long-standing debt rules to allow for higher defense spending and a 500-billion-euro ($541 billion) infrastructure fund.
Franziska Palmas, senior Europe economist at Capital Economics, suggested that the German inflation data released on Monday, combined with similar information from other major eurozone countries such as France and Spain, indicate that headline inflation in the eurozone is likely to decrease in March..
Harmonized inflation in France has not changed in the current month. This figure was 0.9% on an annual basis. It is worth noting that the mentioned reading is below the preliminary expectations of experts interviewed by the media. In Spain, harmonized inflation fell sharply to 2.2% in March after 2.9% last month.
Inflation data in the eurozone will be published on Tuesday, April 1. Experts interviewed by the media predict that this figure will be fixed at the 2.3% mark.
As we have reported earlier, US Core Inflation Hits 2.8%.
