In brief

• Inflation in Germany fell in October to 2.8 percent from 3.3 percent in September.
• The main reason for the decline is the reduction of the energy tax on petrol and diesel, in effect from 1 October until the end of 2026.
• Economists warn that more expensive energy may push inflation back above 3 percent at the turn of the year.

Inflation drops after fuel price cut

Consumer inflation in Germany fell in October to 2.8 percent year on year, after 3.3 percent in September (Tankrabatt: Inflation im Oktober gesunken – DER SPIEGEL) (Inflationsrate geht im Oktober auf 2,8 Prozent zurück – tagesschau.de) (Statistisches Bundesamt : Inflationsrate sinkt im Oktober auf 2,8 Prozent – ZEIT ONLINE). According to preliminary data from the Federal Statistical Office, Statistisches Bundesamt, economists had expected a result of 3.0 percent. The main reason for the decline was the reduction of the energy tax on petrol and diesel, in effect from 1 October (Wirtschaft - Inflationsrate in Deutschland sinkt deutlich auf 2,8 Prozent – Deutschlandfunk).

How the Tankrabatt works

The government has decided to cut the energy tax for the second time this year, despite criticism from some experts. The relief amounts to about 14 cents per litre and applies until the end of 2026. Including VAT, the government estimates that drivers will save up to 17 cents per litre.

Energy still more expensive year on year

Despite the drop in inflation, energy prices remain clearly higher compared with October of the previous year. Food prices rose by 0.4 percent, and services became 2.5 percent more expensive, which is less than in previous months.

Forecasts: inflation may return above 3 percent

Jörg Krämer, head of the economists' team at Commerzbank, believes it is too early for relief. In his view, more expensive energy will gradually raise the prices of other goods and services, and inflation may again exceed 3 percent at the turn of the year. Other economists also expect the rate to stay elevated, because the conflict between the USA and Iran, which has been driving energy prices since the end of February, has not been resolved.

For small businesses, this means cheaper refuelling in the coming months, but also possible increases in energy and delivery costs in the following months.