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Updated: 20:14 05/07/22

Record inflation for Germany

By Liam Sheasby, News Editor

11 May 2022

Inflation in Europe's largest economy rose to 7.4% for April according to the latest figures from Destatis – Germany's federal statistical office.

The increase is a modest 0.1 percentage points but it does mean that Germany (since unification) has set an all-time high inflation rate for the second month in a row. Energy prices rose by 39.5% in March and again by 35.3% in April, whilst food prices are now also following suit – up by 8.6% on average.

Both tie in to Ukraine and the country's ongoing battle with Russia, as Ukraine has huge swathes of farmland that supply central and eastern Europe predominantly. The fear now is that May makes it three months consecutively, and how this could drive the German economy towards contraction as consumer and business confidence respectively take a hit.

Supply chain issues have been criticised over and over again, and whilst things like driver shortages have been tackled, production is still troubled. China's strict reactions to Covid outbreaks have had knock-on effects globally, and the virus' general impact in reducing workforces has seen a general slowdown in output for these supply chains.

All eyes will now be on the United States' inflation figures, which will be released in the next hour or so by the Bureau of Labor Statistics. If the US shows a inflation rising at a rate akin to the UK and Germany then markets will be more convinced that the global economy is facing a downturn in H2. Stagflation (low growth, rising inflation) is already rearing its head, but if GDP growth contracts for two quarters or more then we're into recession – something central banks have been trying to avoid since the pandemic began.

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