Preliminary data released by Germany's Federal Statistical Office on September 30 showed that the consumer price index rose 3.3% year-on-year in September, up from 2.9% in August, and increased 0.6% month-on-month.

Energy prices expanded their year-on-year increase to 14.9%, becoming the main factor driving overall inflation higher; core inflation, which excludes food and energy, held steady at 2.4% for a third consecutive month.

Energy Price Acceleration Contrasts with Slowing Service Price Growth

Germany's inflation rate has been rising steadily in recent months, climbing from 2.3% in June to 2.8% in July, 2.9% in August, and further to 3.3% in September. Measured by the harmonized index of consumer prices used for cross-country comparison in the eurozone, the year-on-year and month-on-month increases in September were also 3.3% and 0.6%, respectively.

The breakdown data showed notable divergences. The year-on-year increase in energy prices widened from 8.3% in July and 10.5% in August to 14.9% in September, while the overall increase in goods prices rose from 3.0% in August to 3.8%. Food price growth edged up slightly from 0.1% to 0.4%. Service price growth continued to slow, declining month by month from 3.1% in June to 2.7% in September.

Core inflation remained stable, indicating that the current rise in overall inflation is mainly concentrated in components such as energy, while price trends across various goods and services still vary. Final data for September will be published on October 13.

More Companies Plan to Pass Energy Costs on to Customers

While core inflation is currently stable, corporate surveys show that energy costs are being transmitted to selling prices. The Ifo Institute released on September 30 that its business price expectations index rose from 21.4 points in August to 22.7 points in September, with more companies planning to raise prices. Among energy-intensive manufacturing firms, the indicator rose from 19.5 points to 24.8 points, while for non-energy-intensive firms it increased from 19.2 points to 20.4 points.

The price expectations index for the trade sector also rose from 30.0 points to 35.6 points; in the services sector, it fell from 20.9 points to 19.8 points, with fewer companies planning price increases.

Timo Wollmershauser, head of forecasting at Ifo, said that gasoline and heating oil have already risen noticeably in price, energy suppliers may raise electricity and natural gas prices in winter, and price pressures on many goods and services will continue to increase. He expects Germany's inflation rate to exceed 3% in the coming months.

ECB Focuses on Cost Pass-Through to Core Inflation

The rise in energy prices and their subsequent pass-through are also a key focus of the European Central Bank's current policy discussions. Since June, the ECB has raised interest rates by a cumulative 50 basis points, lifting the deposit facility rate from 2% to 2.5%.

ECB Executive Board member Isabel Schnabel said on September 30 that since the technical assumptions cutoff date for the September economic projections, oil and gas prices have moved closer to the adverse scenario, and inflation may deviate from the 2% target by a larger margin and for a longer duration. She noted that rising import and producer prices have provided initial signs of input cost pass-through along the production chain, although these pressures have not yet been clearly reflected in core inflation.

The central bank needs to judge in advance the impact of the energy shock on underlying price pressures; if it waits until companies broadly raise prices and wage negotiations are completed before acting, it may be too late. Schnabel also emphasized that subsequent policy assessments will need to observe inflation expectations, the resilience of aggregate demand, and the impact of interest rate increases that have already occurred on the economy.