Price Expectations in Germany Fall Again
Fewer companies in Germany are looking to raise their prices. The ifo price expectations dropped to 16.3 points in August, down from 17.6 points* in July, mainly due to manufacturing and business-related service providers. By contrast, slightly more companies in consumer-related industries and construction than in the previous month are planning to raise their prices. “Overall, the inflation rate in the coming months is likely to remain below the two percent mark targeted by the European Central Bank (ECB),” says Timo Wollmershäuser, Head of Forecasts at ifo. “Energy in particular is significantly cheaper for consumers than it was a year ago.”
Wollmershäuser continues: “However, the price increase for all other goods and services, which is measured by the core inflation rate, is likely to remain largely unchanged for the time being at around 2.5%, and hence above the ECB’s inflation target.”
Price expectations for consumer-related service providers rose to 25.2 points, up from 20.0 in July. More price increases are to be expected, especially in the hospitality sector (37.6 points, up from 26.7* in July). By contrast, the share of tour operators planning price increases fell slightly (34.2 points, down from 35.4* in July). Price expectations also rose slightly in retail, to 25.3 points, up from 24.9 points* in July. Toy retailers (45.0 points, up from 32.7* in July) and DIY stores (36.3 points, up from 1.9* in July) in particular want to raise their prices more frequently. Among food retailers, price expectations declined somewhat to 49.9 points, down from 53.8* in July. Substantial price reductions are to be expected for bicycle dealers, with price expectations dropping to minus 50.3 points, down from minus 33.5 points* in July.
In construction, price expectations rose slightly to 3.3 points, up from 0.9 points* in July. Among business-related service providers (including wholesalers) and in manufacturing, however, fewer companies intend to raise their prices, with price expectations dropping to 18.9 and 5.0 points respectively, down from 20.4* and 7.1* in July.
The points for the ifo price expectations indicate the percentage of companies that intend to increase prices on balance. The balance is obtained by subtracting the percentage of companies that want to lower their prices from the percentage of those that want to raise their prices. If all the companies surveyed intended to increase their prices, the balance would be +100 points. If they all wanted to lower their prices, it would be −100. The balance was seasonally adjusted. The ifo Institute does not ask about the amount of the planned price change.
*Seasonally adjusted
Publication
ifo Konjunkturperspektiven is a monthly German-language online publication that presents the latest results from ifo’s business surveys in the form of graphics and tables.
