Economic situation - Ifo: Decline in inflation likely to stall
According to the economic research institute Ifo, the easing of consumer prices is likely to stall for the time being. The proportion of companies in Germany that want to raise their prices in the coming months is increasing again, the Munich-based researchers reported.
Ifo price expectations rose to 19.7 points in December from 18.1 points in November. Expectations had reached a temporary low in August with a balance of 14.5 points.
The experts expect more price increases in consumer-related service sectors. "Restaurateurs in particular want to increase prices noticeably," the institute reported. In this area, the balance rose from 45.9 to 87.6 points. The return to the normal VAT rate for food on January 1 is likely to play a role here. However, retailers are also increasingly planning price increases again.
The points in the price expectations indicate the percentage of companies planning to increase their prices on balance. The balance is calculated by subtracting the percentage of companies planning to raise their prices from the percentage of those planning to lower their prices.
Lower energy prices had pushed the inflation rate in November to its lowest level since June 2021. Consumer prices were 3.2% higher than in the same month last year. According to many economists, the inflation rate is likely to rise to around 4 percent in December. Last year, the state covered the costs of the December discount for gas and district heating customers on a one-off basis. This effect no longer applies this year.
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- Despite the decline in inflation, some German companies, such as those in the consumer-related service sectors like restaurants, are planning to increase their prices due to factors like the return to the normal VAT rate for food on January 1.
- The stalled decline in inflation, as predicted by the Ifo economic research institute in Munich, is partially due to the rising price expectations among companies in Germany.
- Inflation had seen a temporary decrease in August with a balance of 14.5 points, but it is now expected to pick up again, potentially reaching around 4 percent in December, due to factors such as increased price expectations.
- The experts at Ifo forecast more price increases in the consumer-related service sectors, with restaurateurs in particular planning to significantly increase their prices, which could impact the buying power of German consumers.
- The ongoing economic situation, as indicated by the Ifo price expectations, shows that despite a potential decline in inflation, companies are still planning to adjust their prices, which may lead to a strained consumer budget.
- The easing of consumer prices, as suggested by the Ifo, might not be as beneficial for German consumers as initially thought, as many companies are aiming to counterbalance their own economic challenges through price adjustments.
Source: www.stern.de
