The inflation rate in Germany climbed to 3.8 percent in July, the highest inflation rate since December 1993, the Federal Statistical Office (Destatis) announced, Trend reports citing Xinhua.
The continued increase in inflation rate was caused in particular by a base effect resulting from the temporary reduction of the value-added tax (VAT) in July 2020 as part of the COVID-19 stimulus package, Destatis noted.
"The sudden base effect occurring in July 2021 had been expected as the tax reduction had been passed on to consumers a year ago, involving price decreases for many products," said Christoph-Martin Mai, head of the consumer prices section at Destatis.
Other effects that drove inflation in Germany were the introduction of CO2 prices to the transport and housing sectors, for which a charge of 25 euros (29.28 U.S. dollars) per ton of carbon dioxide emitted was introduced at the beginning of the year.
Energy prices in July, including household energy and motor fuels, even increased by 11.6 percent year-on-year after showing the first signs of slowing down in the previous month, according to Destatis. In particular, heating oil became more expensive, with an increase of 53.6 percent.
Rents and services in Germany continued to develop moderately with a year-on-year price increase of 1.3 percent and 2.2 percent respectively, according to Destatis.
In August, the economic sentiment indicator for Germany from the Leibniz Centre for European Economic Research (ZEW) further fell from the previous month to now 40.4 points, pointing to "increasing risks for the German economy," such as from a possible fourth wave of COVID-19 starting in the fall, ZEW president Achim Wambach said.