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German Inflation Picks Up More Than Expected on Services Costs

Carolynn Look
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German Inflation Picks Up More Than Expected on Services Costs

(Bloomberg) -- Inflation in Germany accelerated more than economists expected in June, in part due to higher prices charged by services providers facing stringent hygiene measures after the lockdown.

Consumer prices rose 0.8% from a year earlier, and 0.7% from the previous month. Both figures were higher than economists’ predictions. State-level releases showed steep increases for hair and cosmetic services, as well as at restaurants and cafes -- businesses still slapped with restrictions to prevent the spread of the coronavirus.

Economists and policy makers across Europe have pondered for months how growth and inflation will be impacted by shutdowns of parts of the economy and the slow reopening.

European Central Bank officials, who aim for euro-area price growth of just below 2%, have been adamant that the crisis will likely damp demand and weigh down inflation. At the same time, some economists have pointed to supply-chain disruptions as possible triggers for sudden spikes.

In Germany, the statistics office said food-price inflation remained above 4% in June, while price growth in services stood at 1.4%. Euro-area data are due on Tuesday.

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