Status: 08/23/2022 12:02 p.m
According to the Ifo Institute, inflation has now consumed the savings accumulated by Germans during the Corona period. Experts expect inflation rates to be even higher in the fall – when government aid has run out.
According to an analysis by the Ifo Institute, private consumption as the driving force behind Germany’s economy will fail over the course of the year. “Inflation is eating up the additional savings of Germans. The savings cushion from the Corona period has now melted away in many households,” said Ifo economic chief Timo Wollmershäuser. At the same time, consumer prices would continue to rise sharply.
70 billion euros more saved
The Ifo Institute analyzed the bank balance sheets of private households. Deposits from private households at banks in Germany therefore increased sharply between the second quarter of 2020 and the first quarter of 2021. The reason: Travel, visits to restaurants and other leisure activities were not possible or only possible to a limited extent due to the pandemic. As a result, a lot of money landed on the high edge.
“If you take the average propensity to save in the five years before the outbreak of the corona crisis as a basis, a good 70 billion euros more were parked in bank accounts than usual during this time,” explained Wollmershäuser. However, banks’ balance sheets show that consumers have increased their reliance on these savings since the end of last year.
Excess deposits almost completely eliminated
These so-called excess deposits were almost completely eliminated by the end of the first quarter of 2022. And in the second quarter, this development continued at an almost unchanged pace. Wollmershäuser explained that the high inflation is likely to have been the driving force behind this “dispensing by households”.
While consumption increased sharply in the first few months of the year despite high inflation, “many leading indicators have been showing a clear setback since the middle of the year”.
Highest inflation in decades
German consumers are currently suffering from the highest inflation in decades because energy became significantly more expensive after the Russian invasion of Ukraine. In July, consumer prices were 7.5 percent higher than a year earlier, after the inflation rate had reached 7.9 percent in May, the highest level since the winter of 1973/1974.
The fuel discount and nine-euro ticket are currently driving down inflation for consumers, but this state aid will expire at the end of the month. Experts are therefore anticipating higher inflation rates of around nine percent in the autumn.