Inflation in Germany picked up speed again in May, with prices rising 2.4% compared to the same month last year, preliminary figures showed on Wednesday.
That marks a slight uptick from April, when inflation was 2.2% compared to the same month in the previous year. It is the first time this year that monthly inflation figures have increased in Germany.
Economists had expected inflation to pick up in May and also pointed to higher wages, which could lead to price increases by companies.
ING chief economist Carsten Brzeski said the data emphasises "how stubborn inflation remains," while KfW chief economist Fritzi Köhler-Geib said efforts to bring down inflation will remain "bumpy."
Deutsche Bank economist Sebastian Becker, on the other hand, did not view May's figures as cause for concern. Thanks to falling energy prices, the inflation rate could - at least temporarily - "fall below the symbolically important 2% hurdle in the summer," he said.
According to preliminary data from Germany's Federal Statistical Office on Wednesday, consumers had to pay a total of 0.6% more for food in May than a year earlier.
Services are expected to have risen by 3.9%, and prices for insurance services rose particularly sharply.
Energy costs dropped 1.1% in May compared to a year earlier, although the expiration in April of a temporary tax break on natural gas and district heating hit consumers.
In the wake of Russia's full-scale invasion of Ukraine in 2022, German lawmakers temporarily reduced the VAT on natural gas and district heating from 19% down to 7%.
Wages for workers in Germany rose faster than inflation during the first quarter of 2024, however, according to wage data also released on Wednesday. Wages grew 6.4% in nominal terms, and 3.8% even after adjusting for inflation, the highest rate since the agency started tracking the figures in 2008.
That should help average German workers regain some of the lost purchasing power during recent years of high inflation.
Some experts, including Commerzbank chief economist Jörg Krämer, believe rising wages for workers could drive prices back up.
"The inflation problem is far from being solved," Krämer said.
According to the preliminary figures, consumer prices rose by 0.1% in May compared to the previous month of April.
The extremely high inflation rates of the past two years are now history. On average for the year, leading economic research institutes expect inflation in Europe's largest economy to slow significantly to 2.3% after reaching 5.9% last year.
The European Central Bank (ECB) raised interest rates in an unprecedented series of hikes to combat inflation and bring it back below 2%.
But with inflation now lower, a first interest rate cut is widely expected when the ECB's Governing Council holds its next monetary policy meeting on June 6.
