The development of consumer prices, especially regarding energy prices (household energy and fuels), caused noticeable financial pressure on private households in 2022 in particular, but also posed and continues to pose a challenge for many people in subsequent years. Since spring 2022, the German Federal Government has therefore adopted three comprehensive relief packages to support consumers. Some measures affect consumer prices directly and have an impact on their general development. Most of these relief measures have expired or have been and are being withdrawn. For this reason, the measures from the 1st and 2nd relief packages are no longer listed here. In addition, legal measures have been enacted which also contribute to the fulfilment of environmental and climate targets and which also influence consumer prices.
CO2 pricing
The CO2 price increase for fossil fuels – motor fuels, heating oil and natural gas – was originally scheduled for 2023. It had been postponed by one year due to high energy prices and has risen from 30 to 45 euros per tonne as of January 2024. This change is likely to have an increasing effect on the price development for diesel, petrol, natural gas and heating oil, as it is a fixed component of these mineral oil products.
Measures of the third relief package with direct reference to consumer prices (September 2022)
Gas, heat and electricity price brake 2023
According to the gas, heat and electricity price brake, 80% of consumption was "capped" and handled with a fixed energy price. This cap (gas at 12 cents per kilowatt hour, district heating at 9.5 cents per kilowatt hour, electricity at 40 cents per kilowatt hour) affected consumer prices if the regional energy prices for gas, district heating and electricity were above this cap. The basic price - this covers the basic costs and is independent of consumption - was not affected by the price brakes. The electricity price cap came into force in January 2023. The gas and heat price cap did not come into force until March 2023. For January and February 2023, however, gas customers received compensation payments in March 2023. For this reason, these measures had already an impact at consumer prices from January 2023. Retrospective disbursements or refunds are usually not included in the consumer price index.
However, the price brake for gas, district heating and electricity only partly influenced or dampened the price development, partly even price increases were measured. Some utilities have adjusted labour prices which were previously below the price brake.
The gas, heating and electricity price brake expired at the end of 2023. As a result, the dampening price effect for the relevant private households will no longer apply from January 2024 onwards. It should be noted here that many private households were no longer affected by the price brakes in the recent past, as final consumer prices were often below the maximum prices set by the price brakes.
Temporary VAT reduction for gas and district heating
VAT on gas (including LPG) and district heating has been reduced from 19 per cent to 7 per cent. The reduction is limited to the period from 1 October 2022 to 31 March 2024. The utilities were asked to pass on the tax reduction to consumers accordingly. It has been and will be taken into account in the price measurement and will have a dampening effect on the respective price development for gas (including LPG) and district heating. The actual impact on consumer prices can only be roughly calculated, as market prices for gas and district heating are currently very dynamic and partly offset or even overcompensate for the dampening effect. In addition, the reduction in VAT for LPG took effect as a supplement in November 2022, but retroactively for October 2022. Due to the late legal implementation, however, the tax reduction was not included in the price measurement in October 2022, but only in November 2022.
As of 1 April 2024, the reduced tax rate of 7 per cent will no longer apply on gas (including LPG) and district heating. The regular 19 per cent rate will then apply again. If this legal change is passed on directly to final consumers, it will have an increasing effect on price development.
One-off payment due to increased prices for natural gas and heat in December 2022
The so-called ‘December one-off payment’ relieved consumers of the costs for natural gas and heat for the month of December 2022. If there was a direct contract with a supplier, the obligation to make contractually agreed advance or instalment payment was abolished in December 2022. This has also been taken into account in the calculation of the consumer price index, as the price for consumers in the month of December 2022 changed as a result. However, tenants and other consumers without their own gas and district heating supply contract pay their costs via the yearly utility bill. They pay monthly instalments combined with their rent. The law provides that landlords pass on or offset the relief from the ‘December one-off payment’ to tenants with the next annual utility bill. These repayments, which cannot be clearly allocated to the reporting month of December, are not taken into account in the consumer price index as a relief measure.
Since all households had to make advance and instalment payments again in January 2023, following the discontinuation of the December one-off payment, this had a one-off upward effect on the price development of natural gas and district heating in January 2023. This affected both the comparison with the previous month and the comparison with the previous year's month. In December 2023, there was an statistical base effect: the selective price decline in December 2022 had a one-off upward effect on the price increase for gas and district heating in December 2023 compared to the same month in the previous year.
Introduction of the Deutschlandticket from May 2023
As a follow-up product to the "9 euro ticket" from the second relief package 2022, which was limited to three months, the so-called "Deutschlandticket" was decided by the Federal Government from the third relief package at a monthly price of 49 euros. Regionally, this price can be lower, and in some cases there are also specific reductions or additional services.
Like the "9 euro ticket" in the summer of 2022, the "Deutschlandticket" is intended to provide financial relief for citizens in view of the sharp rise in energy prices. At the same time, it is intended to provide an incentive to switch from car to bus and rail, thus contributing to achieve the climate goals. With the "Deutschlandticket", citizens can use public transport throughout Germany regardless of federal state, transport association or tariff area.
Since the beginning of April 2023, it has been possible to purchase the "Deutschlandticket" as a monthly subscription primarily online. The ticket is included in the consumer price index from the reporting month of May 2023 - the month in which it could be used for the first time. Compared to the "9 euro ticket", the new "Deutschlandticket" is only partially cheaper than the previous usual market price. Therefore, it has a dampening effect on the consumer price indices for passenger transport services, especially for monthly tickets for regional and local public transport. However, the impact on the consumer price index as a whole is comparatively small. The discussed price increase for the Deutschlandticket to more than 49 euros per month in 2024 was not decided. A price of 49 euros remains to be the upper limit in 2024.
Reduced VAT rate of 7% for restaurants
As part of the Covid-related interim financial help, VAT for on-site consumption was reduced. A reduced VAT rate of initially 5% (until 31 December 2020) and later 7% applied. Due to continuing inflation, this relief measure was also extended until 31 December 2023. However, the effects of this measure on consumer price trends were no longer recognisable in the rates of change compared to the previous year in 2023 after more than a year.
In January 2024, this relief measure was cancelled. The full VAT rate of 19% now applies again to the consumption of food in restaurants. If the VAT increase is passed on to consumers, consumer prices may increase, especially for food. It is possible that this may be passed on with a delay or not in full in individual restaurants, especially when using fixed menus.
Besides that, in the international context, many relief measures have been introduced with an effect on consumer prices.
Eurostat, the statistical office of the European Union, listed these measures according to the effect on the HICP in the following document: