The ifo Institute has confirmed its economic forecast for 2023 and 2024. This sees Germany’s economic output this year remaining at roughly the same level as last year (−0.1 percent). While consumer-related industries suffer from high inflation and are contracting, manufacturing activity will support growth. The economy is then expected to grow more strongly next year, by 1.7 percent.
In the fourth quarter of 2022, some German companies continued to increase their sales prices more than was indicated by the development of purchase prices. “These companies have taken advantage of the situation to increase their profits sharply. This is especially true of companies in the trade, hospitality, and transport sectors, as well as in the construction industry. In agriculture and forestry, on the other hand, which were among the inflation winners in the summer, rising costs have recently had a stronger impact,” says Joachim Ragnitz, Managing Director of ifo Dresden. Overall, the trend had slowed in the fourth quarter.
Significantly 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 29.1 points in February, down from 35.2* points in January. This marks the fifth decline in a row. “Companies have already passed most of the increased costs on to their customers. At the same time, demand is waning in almost all economic sectors. This points to a decrease in inflationary pressure in the months ahead,” says Timo Wollmershäuser, Head of Forecasts at ifo.
In 2022, inflation-driven bracket creep in Germany burdened taxpayers by EUR 10.9 billion. This is shown by calculations of the ifo Institute. Taking into account the lower employment incentives, bracket creep put an additional EUR 9.3 billion tax revenue into the state coffers in 2022. “For 2023, the new Inflation Adjustment Act almost completely offsets the tax burden on households due to bracket creep, but does not compensate for the remaining tax burden due to inflation in 2022,” says ifo President Clemens Fuest.
Fewer German companies feel their economic survival is threatened. The proportion fell to 4.8 percent in January from 6.3 percent in December, finds an ifo Institute survey.
The ifo Institute expects the European Central Bank (ECB) to increase interest rates further in the months ahead. “In the course of 2022, inflation spread from energy and food to many other products, broadening its impact. There is a dan-ger that inflation will become entrenched, and this increases the pressure on the ECB to act,” says ifo inflation expert Sascha Möhrle.
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 35.4 points in January, down from 40.1 points in December. Companies in manufacturing in particular, but also in the service sector, construction, and trade, are planning fewer price increases.
"High inflation rates have driven the German economy into a winter recession.” This is how Timo Wollmershäuser, Head of Forecasts at ifo, responded when Germany’s Federal Statistical Office reported that economic output in the fourth quarter of 2022 fell by 0.2 percent. The Federal Statistical Office had originally expected growth to be flat, based on provisional figures.
Germany’s gross domestic product (GDP) increased by 1.9 percent last year, which represents a much bigger rise than the long-term average. “However, the massive supply shocks that continue to plague the German economy have left their mark. Bottlenecks in energy, intermediate products, and the workforce – greatly exacerbated by the war in Ukraine – hampered production and drove up inflation. As a result, the country’s GDP growth for 2022 was only around half of the 3.7 percent that had been expected before the war began,” says Timo Wollmershäuser, Head of Forecasts at ifo.
Fewer German companies are planning to raise their prices soon than in the previous month, finds the ifo Institute’s latest survey. For the economy as a whole, the ifo price expectations fell to 40.3 points in December, down from 46.2* points in November. Price expectations fell furthest in manufacturing and construction – from 53.3* points to 42.0 points and from 38.4* points to 28.3 points, respectively. But it is also the case in trade and the service sector that fewer companies are planning to raise their prices. Price expectations here fell from 50.6 points to 42.0 points and from 41.4* points to 38.1 points, respectively. “This means that increases in producer and consumer prices are likely to gradually slow down in the months ahead. Inflation rates will, however, remain high,” says Timo Wollmershäuser, Head of Forecasts at ifo.
Des économistes du monde entier tablent sur un recul progressif de l'inflation. C'est ce qui ressort de l'Economic Experts Survey, un sondage trimestriel réalisé par l'Institut ifo et l'Institut de politique économique suisse IWP. Le taux moyen annuel de l'inflation atteindra 7,1 % en 2023, avant de tomber à 5,8 % en 2024 et à 4,5 % en 2026. « En ce début d'année, les perspectives sont encourageantes dans la mesure où les experts annoncent un léger recul des taux d'inflation par rapport au dernier trimestre 2022 », constate Niklas Potrafke, chercheur de l'Institut ifo. « Mais les taux se maintiendront toutefois à un niveau très élevé ».
Economic experts from around the world expect inflation to gradually decline, finds the latest Economic Experts Survey, which is conducted quarterly by the ifo Institute and the Swiss Economic Policy Institute. According to this, the inflation rate worldwide will reach 7.1 percent in the new year, then 5.8 percent next year, and only 4.5 percent in 2026. “Expectations at the beginning of the year are encouraging because, compared with the previous quarter, experts see somewhat lower inflation rates,” says ifo researcher Niklas Potrafke. “Nevertheless, inflation remains at a very high level.”
German personnel managers expect wages to increase by an average of 5.5 percent in 2023. This expectation is shared by those 81 percent of respondents who expect wages to rise, finds the Randstad ifo Personnel Manager Survey. “Especially among small companies and in trade, individual businesses expect even higher wage increases,” says ifo expert Johanna Garnitz. However, 19 percent of the personnel managers surveyed do not expect wages to increase at all.
La récession de l'hiver sera plus clémente que prévu, indique une nouvelle étude prévisionnelle de l'Institut ifo. Selon cette publication, la performance économique de l'Allemagne ne diminuera que de 0,1 %. À l'automne 2022, les chercheurs avaient encore prédit une baisse de 0,3 %. L'Institut ifo a également révisé à la hausse ses prévisions concernant la performance économique allemande de l'année en cours. Elle sera de 1,8 % au lieu de 1,6 %. « Avec 0,4 %, la performance du troisième trimestre 2022, notamment, a nettement dépassé nos attentes. Le produit intérieur brut de l'Allemagne diminuera en effet pendant les deux trimestres de l'hiver 2022-2023, mais il repartira à la hausse au cours des trimestres suivants », a déclaré Timo Wollmershäuser, directeur des études conjoncturelles de l'Institut ifo. En 2024, l'économie allemande poursuivra sa croissance avec un taux de 1,6 %.
The recession expected to hit Germany this winter will be milder than previously anticipated. This is a finding from the ifo Institute’s latest forecast, according to which Germany’s economic output will shrink by only 0.1 percent in 2023. In the fall, ifo researchers were still expecting minus 0.3 percent. The ifo Institute has also revised its forecast for economic output growth in 2022 upward: to plus 1.8 percent from plus 1.6 percent. “The third quarter of 2022 in particular was much better than expected, with plus 0.4 percent. In the two quarters of the 2022–23 winter half-year, gross domestic product will shrink, but after that things will start to pick up again,” says Timo Wollmershäuser, Head of Forecasts at ifo. In 2024, the economy will grow again by 1.6 percent.
La flambée des prix de l'énergie et des intrants ne suffit pas pour expliquer l'ampleur de l'inflation en Allemagne. « Dans certains secteurs, des entreprises semblent avoir relevé leurs prix plutôt dans le but d'augmenter leurs bénéfices, notamment dans le commerce, l'agriculture et les BTP », a déclaré Joachim Ragnitz, directeur adjoint de l'établissement dresdois de l'Institut ifo. C'est ce que semblent indiquer les statistiques officielles sur la performance économique. S'appuyant sur ces données, l'Institut ifo a calculé les écarts entre création de valeur nominale et création de valeur corrigée de l'évolution des prix, afin d'identifier les augmentations de prix non motivées par le renchérissement des intrants.
Higher prices for energy and inputs alone do not explain the extent of inflation in Germany. “Rather, companies in some sectors of the economy appear to have used the price increases to expand their profits. This is especially true in trade, agriculture, and construction,” says Joachim Ragnitz, Managing Director of ifo Dresden. This was suggested by data from official statistics on economic performance, used by ifo to determine differences between nominal and price-adjusted value added. This allows conclusions to be drawn about price increases that were not caused by higher input costs.
A majority of German economists support a higher tax rate for very high incomes. A total of 56 percent of participants in the ifo Economists Panel are in favor of raising the marginal income tax rate on annual incomes of EUR 278,000 or more. However, 52 percent of the participants reject an increase in the top tax rate, which is already payable for incomes of EUR 59,000 and up.
German retailers’ supply problems have eased slightly, finds an ifo Institute survey. In November, 71.1 percent of businesses were struggling with supply bottlenecks, down from 74.9 percent in October. Moreover, there was a notable decrease in pessimism among retailers regarding the coming months.
German companies are passing on their higher purchase prices to their customers, but slowly and not in full. This is the finding of an ifo Institute survey, according to which companies have passed on just 34 percent of their purchase price increases over the past few months. They plan to raise this to 50 percent by April. “This is likely to lead to further inflationary pressure on consumer prices in the coming months,” says ifo researcher Manuel Menkhoff. The companies themselves report that weak demand, competitive pressure, and long-term contracts are holding them back from raising prices.