Price Expectations in Germany Fall for the Third Time in Succession
Companies’ price expectations in Germany fell for the third month in a row in July. According to the latest ifo survey, the proportion of companies surveyed that intend to increase their prices in the next three months has declined further. The indicator slipped to 47.4 points, down from the previous month’s 52.9 points. “Prices are still likely to continue to rise, but the pace will slow. This means that inflation has probably reached its peak and will gradually decline in the course of the second half of the year,” says Timo Wollmershäuser, Head of Forecasts at ifo.
“There is usually a lag of a few months before companies’ price expectations are reflected in consumer prices,” Wollmershäuser adds. Price expectations fell most noticeably in economic sectors with production upstream of consumption. These include construction (40.7 points, down from 51.6 points) and manufacturing (54.6 points, down from 59.5 points). But prices in consumer-related services (hospitality, leisure, culture, entertainment) are also likely to rise more slowly; here, the indicator dropped to 46.3 points, down from 63.1 points. Only in food retail is there still no end in sight to tangible price increases. As in previous months, all retailers surveyed by the ifo Institute indicated that they intended to raise their prices.
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.
