“Inflation is on the decline”
Companies’ price expectations fall to three-year lows
April 2, 2024, 9:47 a.m
Many companies in Germany are lowering their price expectations. That doesn’t mean consumers can expect lower costs across industries, but at least significantly fewer companies are planning increases.
The price expectations of companies in Germany fell to their lowest level in three years in March. The barometer fell to 14.3 points from 15.0 in February, as the Munich-based IFO Institute announced in its company survey. “Inflation is continuing to decline and is likely to fall below the two percent mark in the summer,” said IFO economics chief Timo Wollmershäuser. “From a German perspective, there is nothing that speaks against the ECB cutting interest rates soon.
Fewer companies are planning to raise their prices, especially in consumer-related industries. There were declines in price expectations in retail and gastronomy, but there were slight increases in hotels and tour operators.
In the construction industry, price expectations fell to minus 10.6 points, after minus 6.2 points in February. “Accordingly, the majority of companies even want to lower their prices,” say the IFO researchers. In the manufacturing sector, only a small majority of companies surveyed want to raise their prices, according to the institute.
Consumer sentiment could rise
According to economists, the German inflation rate fell to its lowest level in almost three years in March. Consumer prices are likely to have only increased by 2.2 percent compared to the same month last year, as experts from 15 banks predict on average. That would be the lowest inflation rate since May 2021. In February it fell to 2.5 percent, mainly due to cheaper energy and hardly any rising food prices.
The Federal Statistical Office wants to publish a first official estimate in the afternoon. In the spring, the inflation rate could even fall below the two percent mark, said economist Sebastian Becker from Deutsche Bank. “That would be a welcome development and, above all, could improve consumer sentiment,” said the expert.