Germany inflation slows in April but core prices tick higher

Germany's consumer price inflation eased for a second consecutive month to 2.1% in April 2025, reaching its lowest level since October 2024, though it remained marginally above market expectations of 2.0%, according to a preliminary estimate from Destatis.

Germany inflation slows in April but core prices tick higher

The continued deceleration signals progress in taming inflation, particularly in goods, where price growth slowed significantly to 0.5% from 1.0% in March. This was largely driven by a notable drop in energy prices, which fell 5.4% year-on-year—deepening the 2.8% decline recorded in March—amid lower wholesale gas and electricity rates. Food inflation also moderated slightly to 2.8%, contributing to the overall easing trend. However, inflationary pressures were more persistent in the services sector, where price growth accelerated to a three-month high of 3.9%, up from 3.5% in March. This uptick likely reflects stronger wage growth in labor-intensive sectors and rising costs associated with rent, healthcare, and hospitality. Core inflation—which strips out the more volatile food and energy components—also ticked higher to 2.9%, rebounding from a more than three-year low of 2.6% in the previous month, suggesting that underlying price pressures remain sticky.

Monthly figures

On a monthly basis, consumer prices rose by 0.4%, following a 0.3% increase in March, reinforcing that while headline inflation is trending lower, momentum remains in certain sectors of the economy. The mixed inflation picture complicates the outlook for monetary policy. While the headline drop may offer some relief to the European Central Bank, the uptick in core and services inflation could temper expectations of imminent rate cuts, particularly if similar dynamics emerge across the broader euro area. Analysts will now closely watch upcoming wage data and the eurozone-wide inflation print for further clues on the ECB's policy trajectory. Markets had begun to price in the possibility of easing in the second half of 2025, but persistent core pressures may keep policymakers cautious, especially as inflation remains above the ECB’s 2% target.