More Companies in Germany Want to Raise Prices

Slightly more companies in Germany are planning to raise their prices. After twelve consecutive declines, price expectations went up again in September from 14.7 points* to 15.8 points. “It will be some time before Germany achieves the European Central Bank’s 2% inflation target,” says Timo Wollmershäuser, Head of Forecasts at ifo. Price expectations rose particularly sharply in hospitality, from 49.1 points* to 62.8 points. Among retailers, however, the balance dropped from 33.6 points* to 31.4 points.

“There’s good news from the construction industry. Due to the lull in orders, more and more companies want to lower their prices,” Wollmershäuser adds. Price expectations fell to -12.6 points, down from -10.2 points*. In manufacturing, price expectations rose slightly from 3.8 points* to 4.6 points. “This ought to signal the end of price increases in manufacturing,” Wollmershäuser says. However, this is an average that masks opposing developments: more automakers are planning to raise their prices (34.3 points, up from 21.0 points*), while paper manufacturers are planning to cut them (-55.4, down from -49.7 points*).

Among service providers, more companies overall are once again planning to raise their prices. Price expectations increased from 23.7 points* to 25.3 points. Similar to the situation in trade, wages represent a large proportion of service providers’ costs. Companies are likely to offset a portion of the cost of substantial wage increases by raising prices.

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