Germany’s Wave of Price Increases Recedes

The wave of price increases in Germany will slowly peter out over the next few months. This is a finding from the ifo Institute’s survey. The ifo price expectations dropped to 16.3 points in June, down from 19.1 points* in May. Food and beverage retail experienced a steep decline from 61.4 points* to 45.6 points. The pace of price increases in that segment is expected to gradually lessen. “Overall, however, inflation for consumers will fall only very slowly, because for many service providers, price expectations are declining sluggishly; for example, they went down in hospitality from 34.2 points* to 32.9 points, and in travel agency activities from 46.5 points* to 45.5 points,” says Timo Wollmershäuser, Head of Forecasts at ifo.

In trade overall, price expectations fell from 18.6 points* to 14.2 points. Buyers of consumer electronics can now also expect prices to go down: that figure plummeted from +24.1 points* to –1.5 points. Prices ought to continue to fall in construction, too, even though price expectations increased slightly from –6.8 points* to –5.4 points.

In manufacturing, price expectations fell from 7.7 points* to 6.1 points. Some industries are even showing signs of significant price reductions. “However, it’ll be some time before that trickles down to consumers,” Wollmershäuser says. Price reductions are expected for paper manufacturers (–51.3 after –55.5 points*), in the chemical industry (–33.9 after –28 points*), rubber and plastic goods (–22.7 after –14.3 points*), printing companies (–18.7 after –6.3 points*), glass and ceramics (–7.5 after –8.7 points*), and textiles (–21 after –20.2 points*. Manufacturers of food and animal feed are now planning their first price reductions (–11 points after +4.2 points*). By contrast, further noticeable price increases can be expected among manufacturers of beverages (+34.1 after +26.5 points*), clothing (+38.3 after 50.6 points*), data processing equipment (+30.7 after +20.5 points*), and motor vehicles (+23.6 after +22.1 points*).

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