German inflation rate stagnates at 0.0 pct in August

The inflation rate in Germany stood at 0.0 percent in August and “remained at a low level,” the Federal Statistical Office (Destatis) announced on Friday.

The prices of motor fuels and heating oil in August dropped even by 11.3 percent and 32.7 percent respectively compared to the same month of last year, while electricity prices were up 2.1 percent, according to Destatis.

Besides lower energy prices, “a main driver of the inflation rate is the temporary reduction of the value added tax from July until December 2020,” Oliver Holtemoeller, head of the department of macroeconomics and vice president at Halle Institute for Economic Research (IWH) told Xinhua on Friday.

The introduction of the value added tax (VAT) reduction in Germany “had a downward effect on the consumer prices,” Destatis noted. However, it was “difficult to measure the extent to which the lower tax rates were passed on to the consumers” because many other factors also influenced price developments.

Despite the VAT reduction, the prices for hairdressers and other services for personal care as well as the prices in restaurants and cafes increased by 4.8 percent and 1.9 percent respectively. One reason for the price increase was that “hygienic measures continue to apply,” Destatis noted.

“However, there is substantial heterogeneity between goods,” added Holtemoeller. “All in all, we expect that consumer prices increase only moderately this year in Germany.”