Inflation Continues to Decline in Germany

ifo price expectations in Germany fell to 14.3 points in March, down from 15.0 points in February. This is their lowest level since March 2021. “Inflation is still on the decline and should fall below 2% this summer. From a German perspective, there’s no reason why the ECB shouldn’t cut interest rates soon,” says Timo Wollmershäuser, Head of Forecasts at ifo.

Fewer companies are planning to raise their prices, particularly in consumer-related industries (24.6 points, down from 28.7 points*). Price expectations fell in retail (25.4 points, down from 29.5 points*) and in the hospitality industry (29.5 points, down from 54.4 points*), while there was a slight increase among hotels (33.4 points, up from 31.7 points*) and tour operators (36.9 points, up from 36.6 points*).

In construction, price expectations fell to −10.6 points, down from −6.2 points*. The majority of companies actually want to reduce their prices. In manufacturing, only a small majority of the companies surveyed intend to raise their prices. Price expectations there have risen slightly to 6.4 points, up from 5.0 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