Passers-by walk in the pedestrian zone of the Bavarian capital.
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Although Germany narrowly avoided a technical recession in the third quarter, German inflation surged to 2.4% in October, returning to above the European Central Bank’s 2% target.
The preliminary reports published by the German statistics office Destatis are harmonized across the euro area to achieve comparability.
Analysts polled by Reuters had expected unified inflation to be 2.1% in October.
Coordinated inflation has fallen to 1.8% Septemberafter reaching the ECB’s 2% target August.
Germany’s Statistics Office said on Wednesday that so-called core inflation, excluding volatile food and energy costs, was 2.9% in October, up from 2.7% in September.
Services inflation also rose to 4% in October from 3.8% the previous month.
Deutsche Bank economist Sebastian Becker said in a report translated by CNBC that core inflation has risen again, indicating that the problem of rising price growth has not been resolved and further patience is needed.
“In the short term, there are signs that inflation will rise,” he said, noting that the base effect alone would cause this. However, current weakness in the labor market suggests core data will slow slowly over the next year.
Germany’s Federal Labor Office reported on Wednesday that job losses rose more than expected in October on a seasonally adjusted basis, Reuters report.
Carsten Brzeski, ING’s global head of macro, also said that inflation is expected to rise further in the last two months of 2024 and remain between 2% and 3% throughout next year.
“Inflation stickiness looks set to remain at slightly higher levels as the favorable energy base effect continues to weaken while wages rise,” he said.
Earlier on Wednesday Destatis released inflation data pre-read German GDP increased by 0.2% in the third quarter compared with the previous three months.
The increase surprised analysts polled by Reuters, who had expected Germany’s economy to contract by 0.1%, narrowly avoiding a technical recession – characterized by two consecutive quarters of economic contraction.
Destatis also revised down second-quarter GDP data to a contraction of 0.3% from a previously reported decline of 0.1%.
Consumer price data across the euro zone will be released on Thursday.
