On the Key Price Drivers in 2022 and Outlook for 2023

The German consumer price index (CPI) increased by 7.9% in 2022, roughly the same rate as cumulatively over the years 2012 to 2019. Based on the individual components of the consumer price index, we show that the high inflation momentum was initially concentrated on a few goods: In 2022 as a whole, just under half of the inflation rate was attributable to a share of only 10% of consumer spending in the CPI weighting scheme. Energy and food rose particularly strongly. However, the intra-year trend shows that inflation dynamics were increasingly broad-based at the end of 2022. This is indicated not only by the persistently rising core inflation rate, but also by a look at the distribution of the rate of price increases across products. In Q4 2022, for example, 74 out of 109 components of the consumer price index already show an inflation rate of more than 4%, 28 of them even of more than 10%. Although the influence of energy and food on the overall inflation rate is likely to weaken somewhat in the current year, the core inflation rate will remain high. The pressure on the European Central Bank to act with regard to further key interest rate increases therefore remains high.