German Inflation Remains Steady at 2.9% Amid Soaring Energy Costs

Germans experienced another month of elevated inflation in August, as energy prices continued to surge. The country's headline Consumer Price Index (CPI) remained steady at 2.9% year-over-year, matching the flash estimate. This is despite softer food and core price pressures.

Energy inflation jumped 10.5%, the largest increase in three years, due to higher wholesale gas and power prices. Food prices were relatively flat after months of easing. Core inflation, excluding volatile food and energy prices, rose to 2.4% as services sector pressures persisted.

The main driver of overall inflation was once again rising energy costs, according to Destatis president Ruth Brand. Energy prices increased primarily due to the war in Iran, which had a significant impact on motor fuel prices. Gasoline prices at the pump were up 27.5% year-over-year and 1 percentage point higher than July.

Services inflation reached 2.8%, driven by transport and housing-related costs. However, discretionary spending categories continued to show signs of weakness, indicating a subdued consumer demand in Europe's largest economy.