Germany inflation rises in March, driven by energy prices

Consumer prices in Germany increased more quickly in March, according to preliminary figures from Destatis, signalling a shift after several months of more moderate inflation.

Annual inflation reached 2.7 percent, up from 1.9 percent in February, while prices rose by 1.1 percent compared with the previous month. Using the EU’s harmonised measure, inflation was estimated at 2.8 percent, reflecting a similar upward trend.

The increase was largely linked to higher energy costs, which rose sharply compared with the same period last year, reversing earlier declines. Food prices continued to grow at a slower pace, while services remained one of the more persistent sources of price pressure. Excluding energy and food, underlying inflation held steady, indicating that broader price dynamics have not yet accelerated significantly.

The latest data comes against a backdrop of renewed volatility in global energy markets, with supply disruptions affecting key transport routes such as the Strait of Hormuz. These developments have contributed to rising fuel costs, which are beginning to feed into the wider economy.

Economists expect the impact to continue in the coming months. Analysts at ZEW Mannheim noted that price growth in services had already remained elevated prior to the recent energy developments, suggesting inflation could move higher in the near term.

At Commerzbank, economists pointed to the risk that higher energy costs will gradually be reflected across supply chains, increasing production expenses for businesses. Researchers at Pantheon Macroeconomics also highlighted potential delayed effects on food prices, linked to disruptions in fertiliser supply and transport.

Germany’s recent inflation trends follow a period of sharp price increases after the Russian invasion of Ukraine, when energy costs pushed inflation close to record levels. Although inflation eased significantly over the past two years, the latest data suggests that external shocks can still influence price stability.

As Europe’s largest economy, Germany’s inflation outlook remains closely watched across the region, particularly by neighbouring markets that are closely linked through trade and industrial supply chains.