Fuel tax cut helps cool German inflation to 2.6% in May

Germany's inflation rate eased markedly to 2.6% in May, according to official estimates, despite the upward pressure on prices caused by the war in Iran, reported dpa.

Consumer prices had risen by 2.9% year-on-year in April, the highest rate since January 2024.

Household energy and motor fuel prices were 6.6% higher in May than a year earlier, the Federal Statistical Office said on Friday in its preliminary estimate.

However, a temporary fuel tax cut introduced by the government helped curb price pressures. The measure, in effect from May 1 to June 30, reduced energy taxes on diesel and petrol by around €0.17 per litre.

In April, energy prices in Germany had been more than 10% higher than a year earlier.

"The decisive factors were the fall in crude oil prices compared with April and the fuel rebate in force since the start of the month," said Silke Tober, an inflation expert at the Institute for Macroeconomics and Business Cycle Research (IMK) of the Hans Boeckler Foundation. "This means the fuel rebate has served its purpose."

Economists had expected a delay in companies passing on higher energy, production and transport costs to customers, and expect prices for food and services to continue rising.

According to data from the leading ifo Institute, the share of companies in Germany planning price increases is high.

In May, consumers in Germany had to pay only 0.4% more for food than a year earlier. In April, the figure was 1.2%.