Prices are soaring across the Rhine. Inflation jumped 7.3% in March in Germany, fueled by the war in Ukraine, which is sending energy prices soaring and increasing tensions in supply chains. This indicator, up 2.2 points compared to February, is a record since the Reunification of Germany in 1990, according to the statistical institute Destatis. To find such a high figure, you have to go back to November 1981, in West Germany.
Inflation far exceeded the forecasts of the financial analysis tool Factset, which forecast a rise in prices of 6.2% in March. The harmonized price index, which serves as a benchmark at European level, reached 7.6%, smashing the European Central Bank’s medium-term target of 2%.
Soaring energy prices
The war in Ukraine has caused a new surge in energy prices in Europe, Moscow being one of the main suppliers of hydrocarbons to the EU. Energy prices jumped 39.5% in March in Germany, after rising 22.5% in February and 20.5% in January, according to the institute.
The war also increases the cost of foodstuffs, which rises by 6.2% in March, after 5.3% in February and 5.0% in January. Russia and Ukraine are two world exporters of cereals, especially wheat for cattle. Nitrogen fertilizer prices, of which Russia is one of the main exporters, and energy prices also contributed to this increase.
Raw material shortages
Finally, the invasion increases the shortages of components and raw materials in the supply chains, already destabilized by the coronavirus pandemic, because of the sanctions against Russia. These shortages weigh on German industry, which is obliged to pass these costs on to consumers: the price of goods thus rose by 12.3% in March.