German inflation increased slightly in August, pushed higher by an acceleration in energy costs tied to the Iran conflict, official preliminary figures showed. Headline consumer price inflation rose to 2.9% year on year, up from 2.8% in July.
The EU-harmonised consumer price index came in below the consensus forecast. Analysts polled had expected a 3.1% reading for August, making the actual outturn a touch softer than anticipated.
Energy was the primary driver of the uptick in the headline rate. Energy inflation climbed to 10.5% in August, compared with 8.3% in July, reflecting earlier increases in energy and raw material prices linked to the conflict in Iran. The German government stated it now expects inflation to accelerate to 2.7% for the current year and to be 2.8% in 2027.
Measures of underlying price pressures showed more stability. Core inflation, which strips out volatile food and energy components, remained unchanged from the prior month at 2.4%.
The national inflation figures arrive shortly before the euro zone's inflation release, scheduled for the following day. Economists polled expect inflation for the bloc to be 3.3% in August, up from 2.9% in the previous month.
Policy reactions to the inflation data are in focus. According to sources, European Central Bank policymakers are prepared to raise interest rates at their next meeting in September to mitigate the side-effects of the Iran conflict. Those same sources indicated that there is limited appetite within the institution to signal further tightening beyond that potential move.
Taken together, the German figures point to a modest rise in headline inflation driven by energy while broader domestic price pressures, as captured by the core measure, showed no fresh acceleration in August.