German CPI in April rises to 2.9% YoY

The final data released by the Federal Statistical Office of Germany on Tuesday showed that due to the rise in energy costs, Germany's inflation rate in April rose to 2.9%, in line with the preliminary forecast. This figure further climbed from 2.7% in March, setting the highest level since January 2024.

Energy prices are the core factor driving the overall inflation, with a year-on-year increase of 10.1% in April. Due to fluctuations in crude oil prices caused by the conflict in Iran, the costs of fuel oil and heating oil have seen significant increases of 26.2% and 55.1%, respectively.

Apart from energy, food inflation also slightly rebounded from 0.9% to 1.2%, while commodity inflation accelerated from 2.3% to 2.9%. In contrast, service sector inflation has been more stable, slowing down from 3.2% to 2.8%, and the core inflation rate, excluding the more volatile energy and food sectors, remained at 2.3%.

For investors, the resumption of Germany's upward inflation trend implies that inflation persistence remains strong. Although core inflation has remained stable, input inflation driven by external geopolitical risks is offsetting the benefits brought by the recovery of supply chains, which may make the European Central Bank's interest rate path more cautious. Given Germany's role as a barometer for prices in the largest European economy, if the increase in energy prices does not fall in the short term, it may have a domino effect on the inflation expectations of the entire Eurozone, thereby influencing interest rate pricing after the second quarter.