Germany inflation confirmed steady at 2%

Germany’s annual inflation rate held steady at 2% in July 2025, unchanged from June and matching preliminary estimates, keeping the headline figure at its lowest level in eight months.

The stability in the overall rate was largely driven by ongoing declines in energy costs, which fell 3.4% year-on-year after a 3.5% drop in June. The energy price decline was led by motor fuels (-4.5%) and household energy (-2.6%), with notable decreases in firewood, wood pellets, and other solid fuels (-5.3%), heating oil (-5.0%), and electricity (-2%).

Price pressures in services continued to ease, with the sector’s inflation rate slowing to 3.1% from 3.3%. Still, some subcategories saw significant increases, including combined passenger transport services (+11.3%), parcel delivery services (+9%), and fees for social facilities (+8.2%), highlighting persistent price pressures in specific service areas despite the broader cooling trend.

Food inflation ticked higher to 2.2% from 2% in June, driven by sharp rises in fruit (+7.6%), sugar and confectionery (+5.6%), and dairy products (+4.1%). These gains partially offset the relief from cheaper energy, suggesting that households continue to face higher grocery bills even as overall inflation remains relatively subdued.

Core inflation, which strips out volatile food and energy prices, held at 2.7%, underscoring the persistence of underlying price pressures in the German economy. On a monthly basis, the consumer price index rose 0.3% after stalling in June, with much of the increase coming from seasonal factors such as higher travel-related costs — international flights surged 12.7%, while package holiday prices rose 10.7% ahead of the summer travel peak.

The July figures reaffirm that while headline inflation has stabilized at a level consistent with the European Central Bank’s target, core price pressures remain sticky.

This dynamic could complicate the ECB’s policy path, as it seeks to balance gradual monetary easing with the risk of reigniting inflationary pressures. For German households, the persistence of elevated service and food prices means that real purchasing power gains from lower energy costs are still only partially materializing.