On aggregate price developments

The price index of the gross domestic product (GDP deflator) is one of the most important inflation indicators of national income accounting. This contribution shows how the GDP deflator is calculated following the readjustment of the German national income accounts to the price basis of the previous year and how the most recent data may be interpreted. In Germany, the price level of national income produced domestically in 2005 rose by only 0.4 %; lower rates were last registered in 1999 and 2000 (in 2000, the GDP deflator even declined due to falling unit profits). The major reason for the extraordinarily moderate rate of inflation was that - per unit of real GDP - wages and salaries of people employed in the domestic economy declined and that operating profits no longer rose as much as in 2004 due to rising oil prices. Should these tendencies prevail, the GDP deflator is expected to rise only modestly in the current year.