Trend is changing for the first time this year
The majority of companies want to raise prices
September 29, 2023, 10:09 a.m
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Most companies in Germany want to increase their prices – only a minority are planning to lower them. For the first time in twelve months, this relationship is changing. Rising prices seem to be a foregone conclusion, especially in the catering industry. In one industry, however, the trend is the opposite.
A survey by the Ifo Institute suggests that inflation could prove tough. The so-called price expectations of companies have increased slightly again for the first time after twelve consecutive monthly declines, as the Munich economic researchers announced. “It will probably take some time before the inflation rate reaches the European Central Bank’s two percent target,” said Ifo economics chief Timo Wollmershäuser.
Price expectations rose from 14.7 to 15.8 points in September. According to Ifo, the catering industry in particular rose by 13.7 to 62.8 points, while in retail the value fell from 33.6 to 31.4 points. The index is calculated by subtracting from the proportion of companies that want to increase prices the proportion of companies that want to reduce prices. The amount of the planned price changes does not matter.
However, expectations are particularly low in the construction industry. “Because of the downturn, more and more companies there want to lower their prices,” said Wollmershäuser. Price expectations there fell by 2.4 to minus 12.6 points.
“Price rise in industry almost stopped”
In the manufacturing sector, the value of 4.6 points is close to the limit at which price increases and decreases would be balanced. “This means that the price increase in the industry has almost stopped,” added Wollmershäuser. This average would hide opposing developments in the industry: While more car manufacturers are planning higher prices, more paper manufacturers want to offer their products cheaper.
When it comes to service providers overall, more entrepreneurs want to ask their customers to pay more. Price expectations there rose from 23.7 to 25.3 points. “Similar to retail, wages make up a high proportion of costs in this industry,” emphasized the Ifo Institute. “Entrepreneurs are likely to pass some of the sharp increases in salaries onto prices.”
In September, consumer prices rose by 4.5 percent compared to the same month last year, the slowest rate since the start of the Russian war against Ukraine in February 2022. “The situation on the price front is gradually easing,” says the autumn forecast from the leading institutes for the federal government. The inflation rate is expected to average 6.1 percent this year, but will fall significantly to 2.6 percent in 2024 and fall further to 1.9 percent in 2025.