Fewer Companies in Germany Plan to Raise Prices
The ifo Institute expects inflation to gradually ease in the second half of the year. In a survey conducted in May, the proportion of companies planning to raise their prices in the next three months fell to 57.8 points, down from 61.8 in April, marking the first drop in this indicator for several months. “This is still the second-highest value since 2005, but the trend suggests that monthly rates of inflation will fall from above 7 percent to below 6 percent in the second half of the year, albeit very slowly,” says Timo Wollmershäuser, Head of Forecasts at ifo. “We’re expecting about 6 percent for the year as a whole.” The exception among the sectors is retail, where the share of companies planning price increases rose again slightly in May from 75.6 to 77.4 points.
In May, the share of manufacturing companies that plan to raise prices dropped from 72.6 to 67.4 points; in wholesale, from 79.3 to 68.1 points; in the service sector, from 51.4 to 46.7 points; and in construction, from 64.7 to 56.9 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 plus 100 points. If they all wanted to lower their prices, it would be minus 100. The balance was seasonally adjusted. The ifo Institute does not ask about the amount of the planned price change.
