Germany's Inflation: Cooling Headline, Sticky Services

German inflation is officially cooling. Destatis put the headline rate at 2.6% in May, down from 2.9% in April, with the preliminary June flash pointing lower still (release PE26_199, published 2026-06-12).

Look underneath the headline and the story changes. Goods prices rose just 2.2%, dragged down by food at 0.4% and falling electronics. Services rose 3.1%, half a point above the headline and above target. Services inflation has now outpaced Germany’s overall rate every month since January 2024.

Where the pressure sits

The stickiest categories are the ones interest rates barely touch: social protection at 6.7%, passenger transport at 5.9%, insurance at 5.1%, vehicle repair at 4.8%. These are wage- and admin-driven costs, slow to turn regardless of what the central bank does with rates.

One thing that complicates it: June’s improvement is still a preliminary flash — 2.3% year-on-year versus 2.6% expected, reported 2026-06-30 via investingLive — and the full Destatis release doesn’t land until mid-July. The underlying disinflation story is thinner than the headline suggests, too: most of the recent cooling is the fading energy spike, helped by a temporary fuel-tax cut, an effect that reverses. Core inflation, at 2.5%, has barely moved.