New German Record for Price Increases
Germans ought to prepare for prices to continue rising, since many companies are planning to put theirs up in the next three months. This is the finding of a recent ifo Institute survey conducted in February, which recorded a new high of 47.1 points for the index of price expectations, up from 46.1 points in January and 44.7 points in December. “Russia’s invasion of Ukraine may drive gas and oil costs even higher, with a subsequent effect on many other consumer prices. Right now, it’s becoming more likely that the inflation figure for the whole of 2022 will start with a five rather than a three,” says Timo Wollmershäuser, Head of Forecasts at ifo.
The extremely high values for the index run through all sectors of the economy. A particularly large number of companies in retail (63.3 points) intend to raise their prices, with food retailers leading the way (85.9 points). Next came wholesale, at 62.4 points, followed by manufacturing, at 55.8 points. In construction, the figure was 42.9 points. Only among service providers did price expectations decline, from 41.9 points to 38.6 points.
The points for 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.
