German inflation hits 40-year record in April

Consumer prices in Germany rose at their fastest tempo in four decades, records published Thursday confirmed, as Russia’s invasion of Ukraine pushed up power fees.

Inflation climbed to 7.4 percent in April from 7.3 percent in March, in keeping with the federal statistics employer 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 neighbors, 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 realized.

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-associated lockdowns in China have appreciably prompted interruptions to deliveries from the key production hub.