German Inflation – what is the impact of Russia-Ukraine conflict in real-time?

Germany is one of the biggest energy importers from Russia, which accounted for 39.5% of crude oil imports into Germany in January according to official data. The Ukrainian crisis is thus having a huge impact on the German economy, especially on price level.

According to QuantCube Nowcast based on real-time alternative data, German CPI index surged to +7.1% compared to the previous year. Exhibit 1 shows the evolution of QuantCube German CPI Index and its main components over the last year.

Overall, inflation has been rising since May 2021, mainly due to the post-pandemic recovery and the consequent demand shock and supply chain disruption. Russia’s attack on Ukraine and the consequent sanctions imposed globally are fuelling the existing inflationary pressure with the shortages in energy supplies and restricted shipments for certain commodities.

The main components of the German CPI index that are rising after the war breakout are transports and housing. These increases are driven by motor fuels prices and heating oil prices respectively. According to QuantCube alternative data, motor fuels year-on-year inflation increased from 26.3% on Feb 23 to 47.3 % on April 6, and year-on-year heating oil prices inflation skyrocketed from 43% on February 23 to 100.8 % on April 6.

The energy crisis and Germany’s reliance on Russian imports are threatening the biggest European economy. Interesting to see how Germany will handle this issue.