SHARE
COPY LINK

MONEY

Consumers in Germany face widespread price hikes this year

Consumers in Germany are already feeling the squeeze as the cost of living continues to rise - but according to a recent survey from Munich's ifo Institute, more price hikes are on the horizon.

A shopper packs groceries at the supermarket
A shopper loads groceries into a supermarket trolley. Photo: picture alliance/dpa/Ben Pakalski / www.pakalski.de | Ben Pakalski

In December, the ifo’s price expectations index fell just slightly to 44.6 points, down from an all-time high of 44.9 in November.

The figures were based on a survey companies’ forecasts for the next three months, with high values on the index meaning that firms are expecting their costs to go up significantly. 

“Such increases will filter down to consumer prices,” confirmed Timo Wollmershäuser, Head of ifo Economic Forecasts.

As companies grapples with the high cost of energy and other products, these additional overheads are likely to be reflected in higher prices for customers in the next three months, he added. 

According to the ifo, expectations for significant price rises are currently running through all sectors of the German economy.

In retail, price expectations are at 60 points on the index, suggesting that consumers are set to see significant price increases at the shops in the coming months. 

This was closely followed by wholesale businesses with 57 points and industry with 55.

The lowest value, 34 points, applied to service providers – though even this number represented a new record value for the sector. 

High inflation set to continue

The news comes after months of rapidly rising consumer prices in Germany. 

According to the most recent figures, the prices of everyday goods went up by an average of 3.1 percent last year amid supply bottlenecks and soaring energy costs.

This marks the highest yearly average for three decades.

READ ALSO:

In the coming months, the inflation rate could rise above the four percent mark and only gradually approach the two percent mark towards the end of 2022, Wollmershäuser said.

“Inflation will decline over the course of this year, but slowly,” he warned. “We now expect a rate of inflation of three and a half percent for the year as a whole.”

Higher inflation weakens the purchasing power of consumers because euros are worth much less than before.

It also devalues people’s savings as interest rates continue to be dwarfed by the rising cost of living. 

According to a YouGov survey commissioned by Postbank, one in nine Germans is struggling to afford everyday expenses like groceries and utilities due to the sharp rise in the cost of living. 

“Since food, energy and fuel have become considerably more expensive, but incomes cannot keep up with the price development, people have much less financial leeway than before,” explained Postbank Chief Economist Marco Bargel.

‘Peak has passed’

Though economists remain concerned about the prospect of rising prices over the coming months, shoppers are unlikely to see the same level of price hikes that they faced in the last months of 2021. 

According to the Federal Office of Statistics, consumer prices rose by 5.3 percent in December compared to the same month in 2020, marking the largest jump in consumer prices throughout the year.

“This means that the peak of German inflation has probably now been passed,” said Sebastian Dullien, scientific director of the Macroeconomic Policy Institute, told DPA.

Compared to November, prices went up by 0.5 percent in the run-up to Christmas. 

READ ALSO: How will the cost of living change in Germany in 2022? 

Member comments

  1. Yupp inflation is a tax on the poor, and with the Greens in charge the clean energy plan will built on the backs of the working poor!

    1. With the situation with Russia and Nord Stream 2, it would be slightly poetic if we ended up having to beg other European nations for some of their nuclear power.

Log in here to leave a comment.
Become a Member to leave a comment.
For members

LIVING IN GERMANY

Living in Germany: Exploring locally, Bargeld and the NRW state election

In our weekend roundup for Germany we look at exploring the country this summer, the country's obsession with cash and some facts about North Rhine-Westphalia, which goes to the polls on Sunday.

Living in Germany: Exploring locally, Bargeld and the NRW state election

A chance to explore Germany 

Although we’re still in the pandemic, it feels like life in Germany is beginning to feel a bit more like it did before Covid hit us. With many restrictions easing, people have been really enjoying spring and looking forward to summer.  So it’s no surprise that many of you have been reading our stories about travel. Our articles on the €9 monthly ticket as well as train travel in Germany and beyond have been particularly popular. The public transport offer will also give many people the chance to explore closer to home. I know I am really looking forward to seeing more of Germany, whether it’s around the Brandenburg area near where I live, or going further afield (Heidelberg, I’m looking at you). I’d love to know if you want to use the €9 ticket or if you have any plans to explore Germany this summer. Please fill in this survey on the €9 ticket (it’s open until Monday) and get in touch with your opinions or other travel plans by emailing [email protected]. Thanks so much to those of you who’ve already been in touch.

Tweet of the week

The German love of cash or Bargeld in 2022 while the rest of the world goes contactless is indeed one of life’s greatest mysteries, as this tweet highlights. We’ll definitely be using our ‘ask a German’ series to try and find out more about this habit… 

Where is this? 

Pankstrasse U-Bahn
Photo: John MACDOUGALL / AFP

Berliners or those who’ve visited the capital may recognise this U-Bahn station which is situated in the north. The station is actually part of the Pankstrasse nuclear fallout shelter. Built in 1977 during the Cold War, this “multi-purpose” facility was intended to protect the citizens of West Berlin in case of a nuclear conflict. The bunker serves not only as an U-Bahn stop for commuters but also, in an emergency, could have sheltered 3,339 people for up to two weeks. For those interested, we’d recommend checking out a tour like those run by Berliner Untervelten E.V. Due to Vladimir Putin’s invasion of Ukraine, which has led to massive tension between Europe and Russia, the tours have become even more topical.

Did you know?

Since people in the state of North Rhine-Westphalia (NRW) or Nordrhein Westfalen are going to the polls this Sunday, we thought we’d look at some facts about this western state. This is Germany’s most populated state with about 17.9 million people. It’s also home to the most foreigners – around 2.5 million non-Germans live in NRW. With cities such as Cologne, Düsseldorf, Dortmund and Essen, the state is a culturally rich and diverse part of Germany. Many people don’t know that Bonn was the capital of the former West Germany all the way up to reunification, before Berlin took the title. Many federal buildings and institutions still have their base there. 

The state is led by Christian Democrat Hendrik Wüst who took over last year after Armin Laschet resigned as state premier following his unsuccessful federal election bid. The CDU is currently in a coalition with the Free Democrats. But it looks like change is on the horizon. The CDU and the Social Democrats are both polling at around 30 percent, with the CDU having a slight lead of two to four percentage points. Meanwhile, the FDP appears to have lost support. It’s going to be a tight race – and the Greens party – polling at around 17 percent – will likely be the kingmakers. Important topics for voters include the future of German industry, and how to secure jobs in the move to renewable energy. Many people see this election as a test for the federal government which is led by the SPD’s Olaf Scholz. 

Thanks for reading,

Rachel and Imogen @ The Local Germany 

This article is also sent out as a weekly newsletter just to members every Saturday. To sign up and get it straight into your inbox just go to your newsletter preferences.

SHOW COMMENTS