Price Increases Level Off in Germany
Price increases in Germany are expected to slowly subside over the next few months. Accordingly, ifo price expectations fell in May to 19 points, down from 21.5 in April. In food and beverage retail, the figure also fell, but at a very high level: from 69.7 to 63.2 points. “This means inflation for consumers will fall only very slowly, because for many service providers, too, price expectations are declining sluggishly; for example, they went down in hospitality from 36.4 to 34.1, and in travel agency activities from 48.6 to 46.5 points.”
Price expectations in the trade sector as a whole declined from 26.4 to 18.6 points. Bicycle dealers were an outlier here, as their figure plummeted from +31.2 to -21.8. The majority of these companies are therefore planning price cuts. Construction customers can count on this as well: in this sector, the figure dropped from +3.9 to -6.9.
In manufacturing, price expectations fell from 12.1 to 7.7 points. Some industries are even showing signs of significant price reductions. “However, it’ll be some time before that trickles down to the consumer,” Wollmershäuser says. Price reductions are expected for paper manufacturers (-55.4 after -71 points), in the chemical industry (-27.9 after -23), rubber and plastic goods (-14.2 after -4.4), glass and ceramics (-9.5 after -3.8), and textiles (-20.7 after -10.1).
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.
