Germany's inflation rate reached 7.9% in May, according to data published by the German statistical agency Destatis. The preliminary figures were based on the consumer price index and compared with prices from May 2021.

May's inflation was thus up by roughly one-tenth over the already record-breaking rate in April this year. It's the highest rate of inflation since German reunification and a level similar to that seen in 1973/1974 following the oil crisis.

The statistics agency pointed to the war in Ukraine and rising energy prices as being behind the record level of inflation. Energy prices increased by 38.3% over the same time last year, while the price of food increased by 11.1%.

"Since the beginning of the war in Ukraine, the cost of energy has noticeably increased, substantially affecting the high rate of inflation," the Destatis statement said.

"Another factor with an upward effect on prices is interruptions in supply chains caused by the Covid-19 pandemic," it added.

As with most parts of the world, the rate of inflation in Germany has been rapidly increasing, leaving consumers facing much higher prices for a large range of products and services, thus lowering their purchasing power. Analysts have predicted that Europe as a whole will see an average rate of inflation of 6% in 2022.

German attempts to counter burden of inflation

Germany is planning a series of policies to try and lift the burden on consumers, especially with regard to increasing energy prices.

These include cheap monthly tickets for regional public transport between June and August and a discount for drivers at gas stations.

The discount would mean a decrease in the cost of petrol by 29.55 cents per liter and of diesel by 14.04 cents per liter. This would mean a gap of around €3 billion ($3.23 billion) in taxes to the public coffers.

However, chief economist of Berenberg Bank Holger Schmieding told Reuters that: "The gas pump discount and other interventions may well lead to the inflation rate in Germany increasing further in the coming months."

Shortly before Monday's data was released, Finance Minister and head of the business-friendly Free Democrats (FDP) Christian Lindner said in Berlin that "the top priority must be fighting inflation."

"Inflation is an enormous economic risk and we must fight this inflation so that no economic crisis grows out of it, so that no spiral develops through which inflation feeds itself," he said.

A global crisis

Costs of essential goods in Germany are likely to continue rising, according to Aurelien Duthoit, an industry expert from Allianz Trade. Duthoit predicts an increase of 10.7% for the year, meaning that household spending will likely be up by some €250 per person.

The effects of rising costs are being felt across the EU and the world, with the worst impacts hitting the poorest in wealthy countries and wreaking havoc in some of the world's most vulnerable economies.

The economic and financial crisis in Sri Lanka, which has seen shortages of petrol, medicines and foreign reserves, has led to monthlong protests and clashes with police. 

Bangladesh is now also facing a similar fate, with many in the country concerned about a growing trade deficit caused by the rising cost of imports compared with slower growth in export revenues and a fall in international remittances.

The high cost of fuel and food on the global market has also led to warnings of severe hunger in parts of Africa that are heavily reliant on imported food commodities, especially wheat from Ukraine and Russia.

ab/msh (Reuters, AFP, dpa, AP)