More Companies than Ever Before Want to Raise Prices in Germany
There are currently more companies in Germany wanting to increase their prices than ever before. The ifo price expectations rose to 45 points – the highest it has stood since the surveys began. In the previous month, the figure was 41 points. The ifo Institute asks companies about their plans for price increases in the next three months. “Of course, this will have an impact on consumer prices,” says Timo Wollmershäuser, Head of Forecasts at ifo. “By the end of this year, inflation is likely to rise to just under 5 percent, and the rate will start out well above 3 percent next year. On average, we now expect inflation to be 3 percent this year and 2.5–3 percent in 2022.”
The record high for the value runs through all sectors of the economy. In trade, price expectations stand at 65 points, followed by manufacturing at 56 points and construction at 44 points. The lowest value, 32 points, was measured among service providers. Nevertheless, this still represents a record high for this sector of the economy.
The reason for the rise in price expectations is a major surge in prices for intermediate products and raw materials, which manufacturers and retailers now want to pass on to their customers. At this time, the greatest risk to the medium-term inflation trend is the question of how these cost increases play out. If supply bottlenecks continue, price increases for intermediate products and raw materials could remain high. In addition, the upcoming collective wage settlements might seek to compensate employees for their significant loss of purchasing power, thereby driving costs even higher for companies.
The balance values for price expectations indicate the percentage of companies that intend to increase prices minus the percentage of companies that intend to lower their prices. Neutral responses are disregarded. The balance was seasonally adjusted. The ifo Institute does not ask about the amount of the planned price change.
