inflation
Ifo: Many companies are planning price increases
According to the Ifo Institute, consumers must be prepared for further increases in prices. Photo: Demy Becker/dpa
© dpa-infocom GmbH
Inflation reached its highest level in almost 30 years in December. And according to experts, there is no end in sight to the price spiral for consumers.
According to the Ifo Institute, German consumers and companies must prepare for further price increases.
The index of Munich economic researchers for price expectations fell only slightly in December to 44.6 points, as the institute announced on Wednesday. In November they had reached a record value of 44.9 points. The survey values dragged through all sectors of the economy. “It will have an impact on consumer prices,” said economics expert Timo Wollmershäuser. “Inflation will decline only slowly over the course of this year.”
For the coming months, the institute expects inflation rates to be above 4 percent and gradually approach the 2 percent mark towards the end of the year. For the year as a whole, the Ifo is now anticipating an inflation rate of around 3.5 percent.
Companies pass on costs
According to Ifo, companies pass on the increased costs for energy and for the procurement of preliminary products and merchandise. Even if the rise in energy prices does not continue in the coming months and the prices for natural gas, electricity and crude oil remain unchanged, this will ensure high inflation rates for a while. The researchers pointed out that the increase in consumer prices is measured compared to the previous year. Consumers would have to spend an average of 10 percent more on energy this year.
Wage costs should not be an additional driver of inflation. «The previous wage negotiations indicate no wage-price spiral. We expect collective wages to increase by almost two and a half percent this year and next,” said Wollmershäuser. That would be as strong as the average of the years before the Corona crisis.
In December, the German inflation rate climbed to 5.3 percent, the highest level in almost 30 years.