Price Expectations of Companies in Germany Marginally Higher

German companies’ price expectations for the coming months have risen marginally, finds the ifo Institute’s survey. They rose to 16.4 points in July, up from 16.3 points* in June. “For the first time since October 2022, the share of companies planning to raise their prices has on balance not declined further,” says Timo Wollmershäuser, Head of Forecasts at ifo. A growing majority of the companies surveyed are planning further price increases, especially among retailers (34.8 points, up from after 32.9 points*) and consumer-related service providers (32.9 points, up from 32.7 points*). “This makes it likely that the decline in domestic inflation in particular will take a little longer,” Wollmershäuser adds.

Price expectations in the individual consumer-related areas are developing very differently. Food retailers (54.9 points, up from 43.0 points* in June) and stationery retailers (60.1 points, up from 58.5 points*) in particular are planning more increases. Prices in hospitality are also likely to rise faster again (48.5 points, up from 33.5 points*). In contrast, hotels are planning slightly fewer price increases (31.0 points, down from 32.6 points*). The same applies to the prices of drugstore products (40.1 points, down from 56.2 points*). Only buyers of bicycles can expect prices to fall (minus 26.7 points, down from plus 1.0 point*).

“In contrast to consumer-related businesses, manufacturing companies have now probably stopped increasing prices,” Wollmershäuser says. In manufacturing, price expectations fell to 4.1 points, down from 6.0 points* in June. Here, too, developments are not uniform. The automotive industry is planning more price increases (35.6 points, up from 24.9 points*). By contrast, manufacturers of IT equipment are aiming for even fewer price increases (13.3 points, down from 31.1 points*). Among others, the paper industry (minus 53.8 points, down from minus 52.3 points*) and the chemical industry (minus 27.4 points, up from minus 33.3 points*) are planning to reduce prices. Prices in construction are also likely to fall further (minus 8.1 points, down from minus 5.2 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.

* Seasonally adjusted