According to current plans by German companies, the trend of declining inflation appears to be coming to an end. This is reported by Financeflashnews based on a report by the DPA agency, which refers to data published on Monday by the Ifo economic institute.
The Ifo institute’s price expectations index rose slightly by 0.8 points to 15.1 points in April. This suggests that inflation is likely to stop falling in the coming months and remain just above two percent, said Ifo expert Sascha Möhrle. The institute is thus somewhat more skeptical than it was a month ago, when price expectations fell to their lowest level since 2021. At that time, researchers expressed optimism that inflation was still on the retreat and should fall below two percent in the summer.
In sectors closely related to consumption, price increase expectations rose by 1.2 points to 25.8 points. The survey suggests that prices are likely to rise particularly in the areas of food, drugstores and toys. On the other hand, significantly fewer companies plan to raise food prices. The situation is similar in the hotel and travel industry.
A decline in prices is expected in construction, where the index reached -7.7 points after -10.7 points in March. In industry, the index fell slightly from 6.3 to 6.0 points.
The price expectations index is calculated by subtracting the percentage share of companies that want to raise their prices from the share of those that plan to lower them. Values above zero mean that more companies expect prices to rise. The survey does not address the question of by how much prices are expected to rise or fall.
Inflation in Germany has weakened significantly recently. Preliminary data on the development of consumer prices in April will be published by the Federal Statistical Office Destatis on Monday afternoon.
Additional points to consider:
- The Bundesbank (Germany’s central bank) has been pursuing an expansionary monetary policy in recent years to support economic growth. This has led to an increase in the money supply, which could lead to higher inflation in the future.
- The war in Ukraine is disrupting supply chains and driving up food and commodity prices. This could put upward pressure on inflation in Germany as well.
- However, it is important to note that these are just forecasts and the actual development of inflation may differ. There are also a number of factors that could slow the rise in inflation, such as a stronger euro or weaker domestic consumption.
The situation will need to be monitored and analyzed further to see how inflation in Germany develops in the coming months.
Sources:
- Ifo Institute: The Ifo Institute is a German economic research institute that conducts surveys of businesses to gauge their expectations for the future. The article is based on the Ifo Institute’s April 2024 survey of price expectations. You can find more information about the Ifo Institute and its surveys on their website: https://www.ifo.de/en
