Fewer and Fewer German Companies Plan to Increase Prices

Fewer and fewer German companies are planning to raise their prices in the next three months, finds the ifo Institute’s latest survey. For the economy as a whole, the ifo price expectations fell to 21.5 points in April, down from 27.1 points (seasonally adjusted) in March. This marks the seventh consecutive decline. “This suggests that the wave of price increases has already peaked,” says Timo Wollmershäuser, Head of Forecasts at ifo.

Price increases remain centered on retail and consumer-related services. “Consequently, inflation will likely subside only very slowly in the months ahead. In particular, the core rate of inflation – the increase in consumer prices excluding energy – will remain high,” Wollmershäuser adds. In retail, price plans fell only from 48.7 points* to 43.2 points; among consumer-related service providers, they sank from 43.2 points to 36.3 points.

In some areas of retail, price expectations even rose again. These include food and beverages (from 64.8 points* to 69.9 points), computers and software (from 22.3 points* to 57.9 points), bicycles (from 22.9 points* to 30 points), as well as information and communication equipment (from 33.3 points* to 37.3 points). Those areas planning fewer price increases were primarily hospitality (from 46.8 points* to 36.6 points), DIY stores (from 53.1 points* to 33.4 points), car dealerships (from 27.6 points* to 16.3 points), and consumer electronics retailers (from 28.0 points* to 8.9 points).

Elsewhere, meanwhile, not all that many more price increases are planned. In construction, price expectations slipped from 6.6 points* to 5.0 points; in manufacturing, they fell from 17.7 points* to 12.4 points. This means that a slight majority of manufacturing companies still intend to increase their prices, with clothing manufacturers leading the way (60.8 points, up from 47.4 points* in March) followed by manufacturers of electrical equipment (25.9 points, down from 35.1* points). However, the proportion of manufacturing industries that in fact intend to lower their prices again in the near future is rising. These include in particular the paper industry (-74.0 points, down from -68.8 points*), manufacturers of wood, straw, and cork products (-26.2 points, down from -8.0 points*), and the chemical industry (-23.0 points, down from -13.1 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 +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.

*Seasonally adjusted