Eurozone: Varoufakis discusses the 'greatest beneficiary' in 2018
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For the first time since 1993, inflation rates across Germany rose above four percent. Throughout September, consumer prices were 4.1 percent above the level of the same month last year. For August, statisticians reported an increase in import prices of 16.5 percent over the previous year.
According to the Federal Statistical Office, the last time the Wiesbaden authority put a four before the decimal point was back in December 1993, when it was at 4.3 percent.
Thomas Gitzel, chief economist at VP Bank, warned: “The risks of inflation are currently increasing significantly.
“So far, it has been safe to say that the rise in inflation is temporary.
“But the now significantly higher raw material prices are changing the starting position.”
Imported goods rose by almost 17 percent – as much as they did during the second oil crisis in 1981.
Over the years, natural gas imports rose by 178 percent, with electricity rising by 136 percent year-on-year.
Coal and iron ore have also seen the price of imports rise by 118 and 97 percent respectively.
Mr Gitzel warned the higher gas prices could have an impact on electricity prices.
He added: “This means that there is a risk that the so far selective price increases will eat into large parts of the economy.
“The price-driving effect of the shortage will therefore be with us for longer than was originally expected.”
The reason for the shortages is due to the almost synchronous economic upswing after the coronavirus pandemic.
Hendrik Tuch, chief strategist at asset management Aegon AM, added: “In order to achieve the EU’s rather ambitious climate targets, massive investments are required to reduce CO2 emissions.
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“The investments made by companies and governments to reduce CO2 emissions require a lot of extra materials, which drives up the prices of those raw materials.”
Last week, the Bank of England ramped up its warning on rising inflation after admitting soaring gas prices and problems to the supply chain are preventing the economy from growing as fast as it had expected.
The Monetary Policy Committee, who voted unanimously to keep interest rates at the historic low of 0.1 percent, warned that surging household energy bills could drive inflation above four percent by the end of the year and into the middle of next year.
They also downgraded their expectations for Covid recovery, with gross domestic product set to be 2.5 percent below pre-pandemic levels in the third quarter of this year.
Challenges causing the warning include extra costs associated with the shortage of workers, delays to global supply chains and surging energy prices, and a record rise in wholesale gas costs.
In a letter to the Chancellor, Rishi Sunak, Governor Andrew Bailey said the economy has been “subject to some of the largest shocks” in centuries and economic activity has been “exceptionally volatile.”
Additional reporting by Monika Pallenberg
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