Bad outlook: now inflation really hits

Butter, electricity, gas: the price curve is currently only going in one direction: steeply up. How much more will it cost? A new assessment by the Ifo Institute doesn’t bode well…

Consumers will probably have to dig even deeper in the future – as more companies want to increase their prices in the coming months. This is the conclusion of a recent study by the Ifo Institute in Munich.

The economic researchers ask several thousand companies every month whether they are planning price increases. In fact, this time, all the grocers surveyed indicated that they would increase their prices in the coming months.

Survey: Many companies are planning price increases

The trend is also clear in the other sectors: 92 percent of drugstores want to raise prices, and almost 90 percent of stores want flowers and plants. Toys, clothing, electrical appliances, bicycles and accessories and stationery are also becoming more expensive. More than 87 percent of the restaurants surveyed want to raise prices. The institute expects prices to rise almost across the board in the coming months.

“Unfortunately, the inflation wave is not yet allowed to subside,” said economic head of the Ifo, Timo Wollmershäuser. “Especially in the case of gas and electricity, there is still a lot in the price pipeline.” The economists did not ask how much more expensive the products would be.

Timo Wollmershäuser of the Ifo Institute.

The reason for the enormous price increases are supply bottlenecks and the high purchasing and energy costs. The higher personnel costs due to the new minimum wage should also be felt.

Inflation in Germany: ten percent in September

How expensive it will be for consumers is difficult to predict. But inflation has already reached record highs: After the fuel discount and the nine-euro ticket expired, making everyday life even cheaper for many Germans, inflation hit ten percent in September, according to a preliminary estimate by the Federal Statistical Office. – and higher than ever in 70 years. Consumer prices rose again by 1.9 percent compared to August. By way of comparison, the ECB is actually aiming for an inflation rate of two percent on an annual basis.

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Particularly heavy: the energy and food costs. According to the information, consumers paid 43.9 percent more for energy last month than in September 2021. For food, the difference is 18.7 percent. The price of cooking oil (81.2 percent compared to the previous year), butter (49 percent) or flour and other grain products (43.2 percent) has risen sharply.

Price shock: inflation pushes lower-income households to their limits

The result: Consumers have had to dig so deep that real wages fell by 4.4 percent in the second quarter of 2022, according to the Federal Bureau of Statistics – despite the small wage increase. This is becoming a problem, especially for low-income households. Nearly a third of the German population cannot afford unexpected expenses, the Federal Statistical Office said on Wednesday. Unplanned expenses of 1150 euros or more are not within their budget.

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And the prospects for next year are also bleak: inflation expectations for 2023 vary between five and nine percent. In addition, energy prices are unlikely to peak until next year. The Ifo Institute does not expect normalization until 2024 with an inflation of two percent.

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