January 19th, 2023
Hi, this David Wendler. At Datawrapper I work on design. On this week’s Weekly Chart we take a look at the inflation rate for Germany. I’m not usually into financial topics, but inflation can be a scary thing and I wanted to take a look.
On Monday the 30th of May, the German federal statistics office published a press release that said that the inflation rate for May is expected to be +7.9%. What does that mean? That basically means that consumer prices, like for groceries or dining in a restaurant, increased about 7.9% since May 2021. And that is a lot. As you can see in the chart below, the prediction for May 2022 hits the same level of inflation as during the oil crises in the ‘70s.
When I skimmed the news on Monday, I didn’t see any visualizations of this. So I decided to make one on my own that shows how high this value actually is compared to the history of inflation in Germany. I do like this historical view. It makes you wonder what happened at each spike. What were the reasons that prices went so high?
At the moment prices are increasing for several reasons. Firstly there is the war in Ukraine that creates problems with the supply of gas and oil, resulting in higher prices for these. Additionally, the COVID-19 pandemic is still causing global delivery problems, which makes it harder and more expensive to assemble parts for consumer goods.
This combinations leads to an inflation rate as high as in the '70s, when prices increased a lot because of shortages of oil delivery from the Middle East. In Germany, one of the consequences was an effort to reduce oil consumption. For example the German government imposed multiple car-free Sundays in 1973 and made an adjustment to the speed limit.
The consumer price index represents the average cost of things people buy; the inflation rate measures how much those prices increase from year to to year. Within a single year, often a monthly number is used to talk about inflation. When comparing multiple years, an annualized number is used.
But in this case, I wanted to put the predicted monthly number for May 2022 into a historical context. I could not find historical monthly inflation data for such a long time span, so I decided to calculate it on my own. The German federal statistics office Destatis publishes prices indices for Germany as a long time series, with monthly numbers dating back to 1948. With that you can calculate the inflation for each month.
One problem here was that the price indices that were available have changed over time. The new consumer price index (CPI) is only available since 1991. Additionally, the index’s base year was changed from 1995 to 2015, so these values needed to be harmonized.
In 1990 the previously divided Federal Republic of Germany (BRD, or West Germany) and the German Democratic Republic (DDR, or East Germany) reunified. This chart shows the values for West Germany until 1992 and the values for the reunified Germany afterwards. For sure this is a problem when comparing today’s numbers with historical ones. But I decided the chart was still meaningful, because the difference when comparing the values for the old federal states in 1991 and the new values for all federal states after reunification is small on a historical scale.
To make that historical change clear, I added a background using the highlight range feature in Datawrapper.
Additionally I used some text annotations to explain what you are seeing. I’m so glad that Datawrapper has all these options to create annotations and highlight something in your chart. Give it a try if you haven’t yet. Here you can learn more about text annotations in the Academy.
That’s it for this week. See you next week.