German inflation hit 9.2 percent in the five months to January, according to late data that may require an upward revision to last week’s euro zone figures.
The federal statistics agency said annual inflation was down from 9.6 percent in December, but did not elaborate on the main factors behind the change or how much government subsidies are costing to reduce consumers’ energy bills. Economists had expected German inflation to rise to 10 percent last month, according to a poll by Reuters.
The publication of German inflation data was delayed last week due to “unexpected technical problems”, which the federal statistics agency said on Thursday was related to the change of the base year for price statistics from 2015 to 2020.
This means Eurostat, the European Union’s statistical body, must estimate price growth in Europe’s largest economy to calculate inflation for the euro area as a whole. Germany makes up more than a quarter of all price data used to calculate euro zone inflation.
Any change in euro zone inflation for January could change the perception of how quickly the price decline in the region and change market expectations when the European Central Bank will stop raising interest rates.
As part of the flash forecast that euro zone inflation fell from 9.2 percent in December to 8.5 percent last month, analysts calculated that Eurostat used 8.7 percent for Germany.
Based on higher inflation figures reported by Germany on Thursday, ING economist Carsten Brzeski estimated the euro zone figure for January was likely to be revised upwards by around 0.1 percentage point to 8.6 percent.
“We are still wondering exactly what happened to German prices at the beginning of the year,” said Claus Vistesen, an economist at Pantheon Macroeconomics, adding that the German inflation figure was “a rather high, but small, surprise at the end”.
German central bank boss Joachim Nagel, who sits on the ECB’s rate-governing board, warned this week there was a “big danger” that inflation could remain high if it stopped raising rates too much.
The president of the Bundesbank told the Börsen-Zeitung on Tuesday that “in addition, a significant rate increase” is still needed because even after raising the deposit rate to 2.5 percent last week, this does not yet appear to be “the limit” for him.
Calculating German inflation has been made harder by the role of government subsidies designed to cushion the impact of higher energy prices on households.
In December, Berlin paid the gas bills of most German households. This is a one-off, meaning that when it ends at the beginning of January the consumer’s energy bill will go up again.
An additional complication is that the German government announced plans to introduce a price brake in March to offset most of the increases in gas and electricity costs for households that will be applied retrospectively to bills from the start of the year.
The Bundesbank has estimated that energy price caps and cheap public transport tickets will lower average German inflation by 1.5 percentage points this year.