Energy alone was 14% more expensive than last year, with food prices rising nearly 5%. Other drivers of inflation include changes to German sales taxes following the pandemic and price mark-ups in leisure and hospitality following lockdowns.
The EU statistics office estimates that annual energy prices increased by more than 17% in September, compared with 15.4% in August. Prices for food and services have also risen.
While some of these price pressures will be short-lived, businesses in manufacturing and services expect to pass on higher costs to consumers, Brzeski said in a research note on Friday. Worker shortages are also having an impact.
“The second pass-through channel will be wages. The mismatch in the labor market between the lack of skilled workers and still high unemployment rates as well as a [regionalization] of production as a result of supply chain frictions could give rise to higher wages,” he added.
Other economists also think that inflation in Europe could prove persistent, particularly given higher gas and electricity prices heading into winter and as supply chains remain constrained.
“Further increases in inflation seem a near certainty,” Jack Allen-Reynolds, senior Europe economist at Capital Economics said in a note on Friday. “We now think that the headline [eurozone] rate will reach 4% by November,” he added.
That could prompt the European Central Bank to announce at its December meeting that it will bring an end to pandemic stimulus measures in March, Allen-Reynolds said.