Let’s start with the good news: According to the latest data for January 2024, the rise in inflation in Germany is limited to 2.9% on an annual basis, as announced a few days ago by the German Statistical Office. This is the lowest rate since June 2021, when growth reached 2.4%.

At the end of December, inflation was estimated at 3.7%, while in January 2023 it had shot up to 8.7%. However, already last October, the agricultural product price index, which is usually considered a safe indicator of the evolution of consumer prices, had already shown a noticeable decrease (-14.5% on an annual basis).

“Inflationary pressures in energy are subsiding noticeably, while the upward trend in food is also slowing,” estimates the head of the Statistics Office, Ruth Brandt, today. For 2024, the IfO Economic Institute of Munich considers that inflation in Germany will not exceed 2.4%.

Olive oil: Increase +46%

So everything is fine? Not exactly. The 4% decline in real income recorded in 2022 has not been offset. In fact, according to research by the Hans Böckler Foundation, which is close to German unions, purchasing power has fallen to 2016 levels, mainly due to inflationary pressures in 2021 and 2022.

The truth is that compared to January 2023, a price reduction is recorded in some food items, such as dairy products (-4.6%) or sunflower oil (-21.6%). At the same time, however, many essential items, such as fruit (+10.2%) and vegetables (+8%), show significant increases. Also noteworthy is the 6.6% increase, on average, in restaurant prices, due to the reinstatement of the high VAT rate of 19% for catering from January 1.

Out of control is the situation in olive oil, the price of which has increased by 46% in 12 months. According to experts, this is due to an inversely proportional (ie by at least 40%) reduction in production in southern Europe and mainly in Spain, which has the largest production worldwide and covers 70% of olive oil consumption in the EU.

Every year the Spanish production reaches 1.5 million tons per year, but in the 2022/2023 season it did not exceed 665,000 tons, due to drought. In the summer, for many weeks, the temperature in southern Spain had climbed to 44 degrees Celsius. “This is an economic and social disaster that can hardly be dealt with,” Cristóbal Cano, the general secretary of the Andalusian Agricultural Association (UPA), told German Radio.

Increases in coffee

In coffee, the favorite drink (and) of the Germans, the picture is rather contradictory. Before the Christmas holidays, the big German supermarket chains had reduced their prices, in fact in the discount supermarkets the price reduction was close to 20%. This development seemed to reverse the persistent upward trend of the past months.

However, in recent weeks the price of coffee has been rising again in the international markets. Commerzbank analyst Carsten Fritz tells ARD that “the rise in prices reflects concern over the extreme drought in Brazil, the world’s largest producer and exporter of the Arabica variety.”