As the shockwaves from Russia’s invasion of Ukraine fade, inflation has eased – yet the prices for many essentials continue to bite. Services such as restaurant meals, car insurance and holiday travel remain notably expensive, while food prices are still high enough to cause hardship for many households.
Economists say two forces are largely to blame: strong wage growth and the slowdown in relief from falling energy prices. With these pressures lingering, inflation is taking longer than anticipated to drop below the symbolic 2 percent level – a situation forecast to continue through 2026 and into 2027.
Why inflation is unlikely to fall further in 2026
Looking ahead, Bundesbank President Joachim Nagel has warned that inflation’s decline is proving “stickier than thought,” largely due to rising wages and only mild easing in energy costs.
The Ifo Institute forecasts inflation at 2.2 percent in 2026 (unchanged from 2025) and 2.3 percent in 2027 – still above the European Central Bank’s target of 2 percent.
For households in Germany, this means that 2026 is unlikely to bring a return to the pre‑pandemic days of relatively cheap dining out, affordable travel and predictable grocery costs. Prices are stabilising, but they’re doing so at a higher level – and may yet stay there for some time.
Services keep inflation elevated
Data from the Federal Statistical Office (Destatis) shows inflation stuck above 2 percent for several months, reaching 2.3 percent in November 2025, with services identified as the principal cause.
Domestic travel packages and train tickets saw some of the sharpest price jumps, fuelled by workforce shortages and rising labour costs that companies passed directly onto consumers.
READ ALSO: Berlin, Frankfurt and Munich - How expensive is life in Germany's big cities?
Food inflation, by contrast, has eased to just over 1 percent – a welcome change after years of steep increases. Energy prices, once the primary driver of inflation, have stabilised. But their earlier sharp declines have now run their course, offering little additional relief.
Why perception and reality don’t match
Even though official inflation figures have come down (from 6.9 percent in 2022 to 2.2 percent in 2024 and 2025), public perception tells a different story. A recent survey by the German Economic Institute (IW) found that consumers estimated 2024 inflation at a staggering 15.3 percent – more than seven times the actual rate.
According to the European Central Bank, food prices in Germany have risen by more than a third since the pre-corona year of 2019 – and consumers are feeling the pinch, particularly when doing their daily shopping.
Shoppers feel this difference every time they check out – no matter what the official statistics say, which has led to talk of “supermarket inflation”, according to reports by the German Press Agency.
Wild swings in food prices
While overall food inflation has cooled, individual products have seen dramatic swings. Poor harvests pushed sour cherry prices nearly 50 percent higher in November 2025 compared to a year earlier in Germany, for example. Chocolate bars jumped by more than 25 percent and ground beef and coffee beans rose by more than 22 percent over the same period.
READ ALSO: Rising prices are putting the brakes on retirement savings in Germany
But there were also bright spots. Butter fell by 22 percent, and grapes, olive oil and potatoes each dropped by double‑digit rates. Meanwhile, electronics such as TVs and smartphones grew cheaper last autumn – offering some relief to households.
With reporting by DPA.
Comments