In Germany, slightly more companies than in the previous month intend to raise their prices in April. The ifo price expectations rose a little to 15.1 points in April, up from 14.3 points in March. “Inflation is unlikely to fall any further in the coming months and is set to remain at just over 2%,” says Sascha Möhrle, economic expert at the ifo Institute.
How are economists’ expectations for future price developments evolving worldwide? Can we observe a decline in inflation expectations? The latest wave of the Economic Expert Survey (EES) by the ifo Institute and the Institute for Swiss Economic Policy examines economists’ inflation expectations at a global level. The result: although inflation expectations worldwide remain well above central banks’ inflation target, there is a further decline in the expected inflation rate for 2024 compared to previous quarters. However, long-term inflation expectations show a stagnating or rising trend.
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 in Germany are looking to raise their prices. In February, the ifo price expectations slipped to 15.0 points, down from 18.8 points* in January. This was mainly due to the consumer-related sectors, where price expectations fell from 32.4 points* to 28.9 points. “This suggests that in the coming months, inflation will continue to decline,” says Timo Wollmershäuser, Head of Forecasts at ifo.
More of Germany’s consumer-related companies are planning to raise their prices. The ifo price expectations for these industries rose from 32.3 points* in December to 32.9 points in January. Price expectations increased noticeably among consumer-related service providers in particular, from 37.3 points* to 42.1 points. In retail, by contrast, the proportion of companies planning price increases declined; the balance there fell from 30.0 points* to 28.6 points. “This suggests that in the coming months, inflation will subside, but only slowly,” says Timo Wollmershäuser, Head of Forecasts at ifo.
Many countries around the world experienced a sharp decline in economic activity during the Covid-19 pandemic, followed by a gradual recovery. With high inflation, geopolitical conflicts, and ongoing supply chain disruptions, many regions of the world are once again facing uncertain economic development in the coming years. In the Economic Experts Survey for the fourth quarter of 2023, we therefore asked economic experts about their expectations for (real) GDP growth in 2024 (short-term forecasts) as well as in 2025 and 2027 (medium- and longer-term forecasts).
How are economists’ expectations for future price developments evolving worldwide? Can we observe a decline in inflation expectations? The latest wave of the Economic Expert Survey (EES) by the ifo Institute and the Institute for Swiss Economic Policy examines economists’ inflation expectations at a global level. The result: although inflation expectations worldwide remain well above central banks’ inflation target, there is a further decline in the expected inflation rate for 2024 compared to previous quarters.
The business situation for Germany’s retailers has deteriorated. The indicator fell from -8.8 points in November to -12.1 points in December. “For many retailers, business in the first weeks of the holiday season wasn’t as good as they had hoped,” says ifo expert Patrick Höppner. Their expectations for the coming months also darkened further and remain largely pessimistic.
The proportion of companies in Germany that want to raise their prices in the coming months is increasing again. The ifo price expectations rose to 19.7 points in December, up from 18.1 points* in November. Price expectations reached their temporary low in August 2023 at a balance of 14.5 points. “This means the decline in inflation rates is likely to stall for the time being,” says Timo Wollmershäuser, Head of Forecasts at ifo.
Economic output in eastern Germany and Saxony will increase slightly in 2024, by 0.8 percent and 0.7 percent respectively. This means the upturn remains below the level expected in the summer. In Germany as a whole, the economic recovery will be slightly stronger at an annual average of 0.9 percent.
Price-adjusted gross domestic product (GDP) is expected to rise by 0.9% next year, following a decline of 0.3% this year.
Slightly more companies in Germany are planning to raise their prices. The price plans index rose to 18.0 points in November, up from 15.4 points* in October. This is primarily due to business-related service providers and wholesalers, where the balance value climbed from 21.5 points* to 28.3 points. In consumer-related sectors, however, price expectations continued to fall. Among food retailers, the balance fell from 40.7 points* to 34.2 points; among other retailers, from 28.2 points* to 27.7 points; and among consumer-related service providers, from 29.3 points* to 25.5 points. “That means inflation is continuing to decline,” says Timo Wollmershäuser, Head of Forecasts at ifo.
In Germany, fewer companies are expecting prices to rise in the months ahead. Price expectations fell to 15.3 points in October, down from 15.7 points* in September. The most noticeable drop was in consumer-related industries. Among food retailers, the balance fell from 53.0 points* to 41.6 points, among other retailers from 31.8 points* to 28.3 points, and among consumer-related service providers from 35.1 points* to 29.3 points. “This means that consumer prices will still continue to rise. However, the pace will ease off and with it inflation,” says Timo Wollmershäuser, Head of Forecasts at ifo.
How are economists’ expectations for future price developments evolving worldwide? Can a decline in inflation expectations be observed? The latest survey of the Economic Experts Survey (EES) of the ifo Institute and the Institute for Swiss Economic Policy examines inflation expectations of economists on a global level. The result: although inflation expectations worldwide remain well above central banks’ inflation target, a further decline in the expected inflation rate for 2023 compared with previous quarters is evident.
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.
The Joint Economic Forecast Project Group forecasts a 0.6% decline in Germany’s gross domestic product for 2023. For 2024, the forecast is 1.3%. The inflation rate is expected to be 6.1% in 2023 and to fall to 2.6% in 2024.
The business climate for Germany’s self-employed has deteriorated for the fifth time in a row, finds the latest ifo survey for this segment (“Jimdo-ifo Business Climate Index for the Self-Employed”). The index fell to -19.9 points in August, down from -16.4 points in July. “The situation in the German economy is tense,” says ifo expert Katrin Demmelhuber. “For the self-employed, the risk of entering a downward spiral is increasing.”
Price-adjusted gross domestic product will decline by 0.4% this year. In the next two years, economic output is expected to increase by 1.4% and 1.2%. The inflation rate will fall further from an average of 6.0% this year to 2.6% next year and 1.9% the year after.
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 food and beverage retail, many companies remain affected by supply problems: 69.9% of businesses reported this in July, down from 79.7% in June. Among car dealerships, the figure was 53.4%; in June, this figure was 60.9%. In clothing, toy, and furniture retail, only just under 20.0% of businesses were affected.