Press release No. 305 of 13 August 2020
Consumer price index, July 2020
-0.1% on the same month a year earlier (provisional result confirmed)
-0.5% on the previous month (provisional result confirmed)
Harmonised index of consumer prices, July 2020
0.0% on the same month a year earlier (provisional result confirmed)
-0.5% on the previous month (provisional result confirmed)
WIESBADEN − The inflation rate in Germany, measured as the year-on-year change in the consumer price index, stood at -0.1% in July 2020. This means that the inflation rate declined in July 2020 (June 2020: +0.9%). The Federal Statistical Office (Destatis) also reports that consumer prices decreased by 0.5% compared with June 2020.
Value added tax cut effective from 1 July 2020 dampening prices
After the inflation rate increased slightly in June 2020, the value added tax reduction, which is a measure of the Federal Government’s stimulus package, had a downward effect on the development of prices. To what extent the lower tax rates were passed on to consumers is very difficult to determine since the price development is influenced by many factors. The effect of the VAT rate reductions can therefore be quantified by model calculation only. Assuming that the VAT cut was fully and instantly passed on to consumers, the inflation rate would, arithmetically, be 1.6 percentage points lower in July 2020. Without the tax cut, the inflation rate would have been higher by a maximum of 1.6 percentage points.
Year-on-year decline in energy product prices accelerating, increase in food prices slowing
The prices of goods (total) decreased by 1.4% from July 2019 to July 2020. The value added tax cut was probably one of the causes. At -6.7%, the fall of energy prices accelerated slightly year on year (June 2020: -6.2%) although oil prices are on the rise again in the world market. A price decline was recorded especially for heating oil (-31.3%) and motor fuels (-12.9%). Electricity prices rose by merely 2.1% (June 2020: +4.1%). Food prices were up by 1.2% compared with a year earlier, with the price increase slowing markedly as well (June 2020: +4.4%). However, above-average price increases were again recorded for fruit (+7.8%), meat and meat products (+5.4%), while the prices of edible fats and oils were down (-3.4%). Owing, among others, to the VAT reduction, there were falling prices in other groups of goods as well, for example clothing and footwear (-1.7%) and durable consumer goods (-1.0%). There were considerable price rises for tobacco products (+6.6%), which are exempt from the VAT cut.
Inflation rate excluding energy products (+0.8%) markedly higher than overall inflation
The year-on-year decrease in energy product prices continued to have a downward effect on the inflation rate. Excluding energy product prices, the inflation rate would have been +0.8% in July 2020; excluding the prices of energy products and food, it would have been +0.7%.
Above-average 1.2% increase in service prices compared with a year earlier, almost no impact of lower value added tax
The prices of services (total) rose by an above-average 1.2% in July 2020 compared with the same month a year earlier. A major contributing factor was the increase in net rents exclusive of heating expenses (+1.4%) because households spend a large part of their consumption expenditure on this item which, in addition, has been unaffected by the value added tax reduction. Despite the reduction in value added tax, however, higher prices had to be paid for hairdresser services and other services for personal care (+4.9%) and for visits to restaurants, cafés and the like (+1.6%). The prices of long-distance transport tickets were markedly down (-16.0%). This was largely due to the reduction in value-added tax on long-distance rail tickets from 19% to 7% that took effect at the beginning of the year, while the current cut of the reduced tax rate from 7% to 5% only had a partial effect.
Prices down 0.5% month on month
Compared with June 2020, the overall consumer price index fell by 0.5% in July 2020. The prices of energy products (total) were down 0.7%, with heating oil prices declining most markedly (-4.4%). Hingegen stiegen die Kraftstoffpreise um 1,5%. In the holiday month of July, mainly seasonal price rises were observed for package holidays (+16.6%) and air tickets (+4.6%), while there was a limited supply of trips and flights. Compared with June 2020, many goods and services were cheaper in July 2020 due to the value added tax cut. Food prices (total) declined considerably by 2.7%, and an additional seasonal decrease in prices was observed for fruit (-3.2%) and vegetables (-6.1%). The prices of clothing and footwear were also down (-4.6%), which was mainly due to seasonal reductions in the prices of summer articles.
Inflation rate of +0.4% expected for euro area
The harmonised index of consumer prices for Germany (HICP), which is calculated for international comparisons, remained unchanged in July 2020 compared with July 2019. According to the Eurostat early estimate of 31 July 2020, the inflation rate in the euro area was +0.4%. The HICP will next be released on 17 August 2020 (https://ec.europa.eu/eurostat/de/news/release-calendar). For HICP results of all European countries please go to the Eurostat pages.
Methodological note:
Previous information on the impact of the value added tax cut on consumer prices was provided in press release no. 215 of 15 June 2020. Price collection for purposes of consumer price statistics has again been faced with new challenges due to the temporary reduction in value added tax rates from 1 July 2020, and especially owing to the different handling of this reduction in the individual shops. The good quality of price collection has been assured in close coordination with the statistical offices of the Länder. Price reductions at the cash registers (tills) have also been taken into account.
Only some prices could not yet be collected in the reference month of July 2020 due to the present corona crisis. For more information on the methods used and on the impact of the corona crisis on price collection please refer to our Methodological paper.
Crisis Monitor enables comparison between corona crisis and financial/economic crisis
The consumer price index also forms part of the "Crisis Monitor" by means of which the Federal Statistical Office compares the development of major short-term indicators in the corona crisis and the financial and economic crisis of 2008/2009. The Crisis Monitor complements the Corona statistics webpage, which has provided statistical information on the economic and social consequences of the corona pandemic since early April.
German EU Council Presidency
As of 1 July, the Federal Statistical Office will organise the meetings of the Council Working Party on Statistics to be held during Germany’s EU Council Presidency under the chairmanship of its President Dr. Georg Thiel. Information on our activities during the Presidency of the Council of the EU is provided at destatis.de/eu2020.
Note on the memorandum item in the last column of the table:
This shows the purely mathematical impact excl. the value added tax change (constant VAT rates).
Example: The “Clothing and footwear” subindex includes all goods and services with a standard tax rate of 16% (before 1 July 2020: 19%). In purely mathematical terms, excluding other price effects, the month-on-month rate would have been 2.5 percentage points higher. However, the prices actually recorded were down 4.6% month on month. After deducting the VAT cut, the decline was only 2.1% (-4,6% plus 2.5 percentage points). In purely mathematical terms, the decline on the previous month was stronger and thus cannot be fully attributed to the VAT reduction.
| Overall index / subindex | Weighting | Change on the same period a month earlier | Change on the preceding month | Memorandum item: theoretical impact excl. VAT reduction 1 |
|---|---|---|---|---|
| in per mill | in per cent | Percentage points | ||
| 1: Only the current VAT reductions from 19% to 16% (standand tax rate) and from 7% to 5% (reduced tax rate) are taken into account. Here it is assumed that these reductions are passed on immediately and completely to the consumers. | ||||
| Overall index | 1,000.00 | -0.1 | -0.5 | 1.6 |
| Food and non-alcoholic-beverages | 96.85 | 1.0 | -2.7 | 2.0 |
| Food | 84.87 | 1.2 | -2.7 | 1.9 |
| Alcoholic beverages and tobacco | 37.77 | 3.2 | -0.6 | 1.0 |
| Clothing and footwear | 45.34 | -1.7 | -4.6 | 2.5 |
| Housing, water, electricity, gas and other fuels | 324.70 | 0.4 | -0.4 | 0.9 |
| Net rent exclusive of heating expenses | 196.32 | 1.4 | 0.1 | 0.0 |
| Household energy | 68.82 | -3.5 | -1.8 | 2.5 |
| Furniture, lighting equipment, appliances and other household equipment | 50.04 | -0.7 | -1.9 | 2.6 |
| Health | 46.13 | 0.7 | -0.8 | 1.3 |
| Transport | 129.05 | -3.2 | -0.1 | 2.2 |
| Communication | 26.72 | -2.5 | -2.2 | 2.3 |
| Recreation and culture | 113.36 | -0.4 | 3.7 | 2.2 |
| Package holidays | 26.62 | -1.5 | 16.6 | 3.0 |
| Education | 9.02 | -0.2 | 0.0 | 0.3 |
| Restaurant and accommodation services | 46.77 | 1.9 | 0.0 | 2.0 |
| Miscellaneous goods and services | 74.25 | 1.8 | -0.6 | 1.2 |
| Overall index | ||||
| Excluding food and energy | 811.30 | 0.7 | -0.1 | – |
| Excluding energy (household energy and motor fuels) | 896.17 | 0.8 | -0.4 | – |
| Excluding heating oil and motor fuels | 957.98 | 0.7 | -0.5 | – |
| Goods | 468.16 | -1.4 | -1.9 | – |
| Non-durable consumer goods | 297.54 | -1.5 | -1.5 | – |
| Energy | 103.83 | -6.7 | -0.7 | – |
| Services | 531.84 | 1.2 | -0.8 | – |
Detailed data and long time series of consumer price statistics can also be found in the Genesis Online database in tables 61111-0004 and 61111-0006 (consumer price index) as well as in tables 61121-0002 and 61121-0004 (harmonised consumer price index).
