German inflation hits 40-year record in April

Consumer prices in Germany rose at their fastest pace in four decades, data published Thursday showed, as Russia’s invasion of Ukraine pushed up energy prices.

Inflation climbed to 7.4 percent in April from 7.3 percent in March, according to the federal statistics agency Destatis.

“Energy prices, in particular, have increased considerably since the war started in Ukraine” with a knock-on impact for inflation, Destatis said in a statement.

The last time prices rose at a faster pace was for West Germany in the autumn of 1981, as the Iran-Iraq War caused oil prices to increase “sharply”.

Germany, like many of its European neighbours, is highly dependent on supplies of Russian gas to meet its energy needs.

The outbreak of the conflict sent prices soaring, while the threat of a potential stop to supplies could push inflation higher if realised.

On Wednesday, the Russian energy giant Gazprom stopped deliveries to Poland and Bulgaria for refusing to pay in rubles.

German inflation would likely “accelerate further in the coming months”, said Carsten Brzeski, head of macro at the ING bank, as the war in Ukraine continued to rumble.

While the soaring cost of energy was still the main driving force behind rising prices, “the pass-through to all kinds of sectors is still in full swing”, Brzeski said.

Year-on-year prices for energy in the inflation statistics rose by 35.3 percent, while food costs increased by 8.5 percent in April, according to Destatis.

“Delivery bottlenecks due to interruptions in supply chains caused by the Covid-19 pandemic” had also delivered a bump to inflation, Destatis said.

Coronavirus-related lockdowns in China have notably caused interruptions to deliveries from the key manufacturing hub.