Germany’s inflation surged to 2.4% in October, back above the European Central Bank’s 2% target, even as the country narrowly avoided a technical recession in the third quarter.
The preliminary print, announced by German statistics office Destatis, is harmonized across the euro area for comparability.
Analysts polled by Reuters had been expecting harmonized inflation to come in at 2.1% in October.
Harmonized inflation had dropped to 1.8% in September, after coming in at the European Central Bank’s 2% target in August.
So-called core inflation, which strips out more volatile food and energy costs, came in at 2.9% in October, the German statistics office said Wednesday, an increase from the 2.7% reading of September.
Services inflation also nudged higher to 4% in October, from 3.8% in the previous month.
In a note translated by CNBC, Deutsche Bank economist Sebastian Becker said that the renewed rise in core inflation showed that the problem of growth in price increases was not resolved, and that further patience was needed.
“In the short term the signs are pointing towards higher inflation,” he said, noting that the impact of base effects alone would cause this. However, the current weakening of the labor market suggests that the core figure will ease slowly throughout next year.
The German federal labor office on Wednesday reported a larger-than-expected increase in the number of unemployed people in October in seasonally adjusted terms, Reuters reported.
Carsten Brzeski, global head of macro at ING, meanwhile said that inflation was expected to rise further in the last two months of 2024 and then stay between 2% and 3% throughout next year.
“The stickiness of inflation at slightly too high a level still looks set to continue as favourable energy base effects will continue petering out while, at the same time, wages are increasing,” he said.
The inflation data comes after Destatis earlier on Wednesday posted a preliminary reading of Germany’s gross domestic product, which grew 0.2% in the third quarter compared to the previous three months.
The increase surprised analysts polled by Reuters who had anticipated a 0.1% decline, allowing Germany to narrowly avoid a technical recession — which is marked by two consecutive quarters of contraction.
Destatis also revised down the second-quarter GDP figures to a 0.3% contraction, from a previously reported 0.1% dip.
Consumer price data for the broader euro zone is due out on Thursday.