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ECONOMY

German inflation drops to lowest level since start of war in Ukraine

German inflation slowed in September to the lowest level since the outbreak of the Ukraine war, data showed Thursday, offering a glimmer of hope even as Europe's top economy struggles to emerge from a recession.

groceries
German groceries saved in a cart in Hanover. Photo: picture alliance/dpa | Julian Stratenschulte

Russia’s invasion of Ukraine last year, and subsequent move to slash crucial gas exports, triggered an energy crisis and sent consumer prices surging in Europe, with Germany particularly hard hit.

But inflation came in at 4.5 percent year-on-year this month, down from 6.1 percent in August, according to preliminary data from national statistics agency Destatis, with sharply lower energy costs contributing.

The last time inflation was lower was in February, 2022, the month Russia sent its forces into Ukraine, it said.

READ ALSO: What impact has a year of war in Ukraine had on Germany’s economy?

“The abrupt drop in inflation is an important signal for the success of the fight against inflation,” said Fritzi Koehler-Geib, chief economist at public lender KfW.

“This can help to continually weaken price increases in the coming months as consumers and companies adjust their inflation expectations downward under the impression of the positive news.”

The news will come as a relief to the European Central Bank, which has hiked interest rates aggressively to fight inflation, and will bolster expectations of a pause at its next meeting in October.

It is also a boost for policymakers in Europe’s industrial powerhouse as they battle myriad problems.

There is weakness in the key manufacturing sector and households are feeling the pain of the ECB rate hikes.

Problems in the global economy, and in particular a slow recovery from the pandemic in Germany’s top trading partner China, are also weighing on the export giant.

Gloomy outlook

An updated joint forecast from leading economic institutes released Thursday highlighted the challenges — they now predict the German economy will shrink by 0.6 percent across the whole of 2023, sharply lower than earlier predictions.

The economy is struggling to get back on its feet after falling into recession around the turn of the year, and stagnating in the second quarter.

READ ALSO: German recession predicted to be ‘less than feared’

There were positive signs at the start of the year that Germany may have weathered the energy crisis better than expected, and could avoid a sharp downturn this year.

But a string of gloomy signals in recent weeks — from lacklustre exports to poor business confidence — suggest the outlook is worsening.

The IMF has predicted that Germany will be the only major advanced economy to shrink this year, while the European Commission earlier this month said it expects the German economy to contract more sharply than previously forecast.

On the latest inflation reading, economists said the sharp fall was also driven by some one-off factors which distorted the comparison.

These included the end of a popular discount travel card system in Germany in September 2022, which pushed up prices then.

Still, ING economist Carsten Brzeski said the data has “made the call for a pause at the European Central Bank’s October meeting even stronger,” even if eurozone inflation remains well above the ECB’s two-percent target.

“Confidence continues to weaken and inflation has come down, even though it is still nowhere near levels that would bring relief or comfort to the central bank,” he said.

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MONEY

How German ministers want to protect online ticket purchases

Once a year, consumer rights ministers from Germany's federal and state governments gather for a joint conference. This year, improving online ticket sales and better data protection measures are on the agenda.

How German ministers want to protect online ticket purchases

North Rhine-Westphalia’s consumer protection minister Silke Gorißen (CDU) will present proposals for further consumer protections for online ticket sales at the consumer ministers conference (VMK) on Thursday and Friday. 

Gorißen is pushing to make online ticket sales more transparent and give consumers more rights to back out of purchases if they don’t have enough information. 

Under the proposals, consumers would receive more information before purchasing tickets, such as details on the number of tickets sold by each provider and the prices for different seat categories.

Currently, ticket prices are often only visible during the purchasing process. 

The ministers will also consider whether consumers should be granted a right of withdrawal when buying tickets online. 

READ ALSO: How Germany is making it easier for consumers to cancel contracts

“The process of buying tickets is becoming increasingly complex and confusing, often limited to very narrow time windows,” Gorißen told DPA ahead of the conference. “I expect providers to act more in the interest of consumers. The market power of large ticket portals should not result in unclear and non-transparent sales.”

More data protection online

According to DPA, Gorißen also wants users of telecomms services to be better protected when it comes to their personal data. 

NRW’s consumer minister believes providers of emails, chats, or telecommunications services should be required to put measures in place to detect malware that’s designed to steal personal information from users. This should be done at the EU level, Gorißen said. 

Moreover, Gorißen says there should be more information on online safety made available through a consumer hotline. 

“IT security responsibility should not solely depend on the digital competence of users,” the CDU culture minister explained. “Protection against cyberattacks must become a societal responsibility.”

READ ALSO: The German mobile companies with the best – and worst – coverage

The proposals are set to be voted on by consumer ministers on Friday. 

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