Companies in Germany Expect Lower Prices

Inflation in Germany is likely to fall further. German companies’ price expectations for the coming months have declined somewhat, according to the ifo Institute’s Business Survey. They fell to 14.7 points in August, down from 16.3* points in July. “However, the decline in inflation will be a long, hard road,” says Timo Wollmershäuser, Head of Forecasts at ifo. Among retailers, for example, the balance of price expectations fell only from 34.9* to 33.5 points; in hospitality, from 47.8* to 46.6 points; and in the food and beverage trade, from 55.3* to 55.1 points.

“In contrast, the price increase in manufacturing seems to have almost stopped,” Wollmershäuser continues. Price expectations there fell to 3.7 from 4.0* points in July. However, this is an average that masks opposing developments: automakers are still planning to raise their prices (+21.6 points), while paper manufacturers are planning to cut them (-48.1). Service providers as a group are also planning to raise their prices further. However, price expectations continued to decline, down to 23.7 from 27.0* points. In construction, somewhat more price reductions are on the horizon, with price expectations falling to -10.0 points from -8.3*.

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