Austrian Inflation Increases: Higher Costs for Housing, Electricity, Water
In a recent announcement by Statistics Austria, the country's annual inflation rate has risen to approximately 3.5%–3.6%, marking the highest level since April 2024. This surge in prices is primarily attributed to rising energy costs, persistent food price increases, and sustained service sector inflation.
In the hospitality industry, prices rose twice as fast as the general inflation rate in March. This increase was reflected in the cost of food and non-alcoholic beverages, which climbed by 3.1%, as well as prices in restaurants and hotels, which rose by 5.8%. However, airline tickets experienced a slight decrease of 2.7% in March, although there was a significant increase of 13.7% in February.
Energy costs have emerged as a significant driver of inflation. The expiration of the electricity price brake and rises in CO2 pricing have intensified inflation in the energy sector during the first half of 2025. As a result, electricity remained the main price driver, partly due to the expiration of the electricity price brake. In March alone, electricity prices rose by 36.3%, up from 35.7% in February.
Food prices have remained persistently high, with an annual increase of around +4.4%. This trend is reflected in the cost of coffee, which increased by 17.7% in March, and the overall food and non-alcoholic beverages sector.
Inflation in services remains elevated at around +4.5%, making it the largest contributor to overall inflation. Despite some expectation of easing due to weaker second-round effects, service sector cost pressures continue, including public sector fee increases starting mid-2025.
Interestingly, fuel prices increased at a lower rate compared to the overall inflation rate. Fuel prices, specifically heating oil and gas, have contributed to the upward trend in energy inflation. The cost of repairing private vehicles also increased by 3.7% in March.
In a positive note, cheaper fuels, airline tickets, and package holidays helped ease inflation somewhat. Fuel prices were 6.5% cheaper compared to last year, helping to reduce overall inflation by 0.3 percentage points.
Tobias Thomas, the Statistics Austria chief, sees the 2.9% inflation rate as a step towards the 2.0% inflation target set by the European Central Bank (ECB). The price level (CPI) increased by an average of 0.2% from February to March, according to Statistics Austria. The inflation rate (CPI) in Austria was 2.9% in March, as announced by Statistics Austria on Wednesday.
The prices for housing, water, and energy increased by 5.2% in March, the same as in February. However, the rent brake for regulated rental agreements did not apply in March but came into effect on April 1. Rents, including new rentals, increased by 4.1%. Expenditure on various goods and services increased by 4.3% in March.
[1] Statistik Austria (2025). Inflation in Austria: July 2025. [online] Available at: https://www.statistik.at/web_en/statistics/National/Inflation/Inflation_in_Austria.html
[2] Österreichische Nationalbank (2025). Energy price developments and inflation in Austria. [online] Available at: https://www.oenb.at/en/research/research-departments/macro-finance-and-monetary-policy/energy-price-developments-and-inflation-in-austria.html
[3] European Central Bank (2025). Inflation rates in the Eurozone. [online] Available at: https://www.ecb.europa.eu/stats/euroarea/inflation/html/index.en.html
[4] European Commission (2025). Inflation rates in the EU. [online] Available at: https://ec.europa.eu/eurostat/web/main/data/database
[5] International Monetary Fund (2025). Inflation rates worldwide. [online] Available at: https://www.imf.org/external/pubs/ft/weo/2025/01/weodata/index.aspx
- Due to the rise in energy costs and food prices, as well as sustained service sector inflation, the hospitality industry's expenditure on food and non-alcoholic beverages, along with prices in restaurants and hotels, surged significantly in March.
- In an attempt to reach the 2.0% inflation target set by the European Central Bank (ECB), the Finance Ministry may need to closely monitor the country's expenditure, particularly in sectors affected by persistently high prices, such as food, energy, and services.
