Inflation in Germany remains at a high level. At 7.5 percent, the year-on-year inflation rate in July was slightly below the June figure of 7.6 percent, as the Federal Statistical Office announced on Thursday. Looking at the previous month, prices were estimated to be 0.9 percent higher on average.
Energy was again the strongest cost drivers with an increase of 35.7 percent and food (14.8 percent) compared to July 2021. According to the statisticians, the higher consumer prices are due to higher production costs as a result of the Ukraine war. “In addition, there are the price-driving effects of interrupted supply chains as a result of the corona pandemic.”
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But has inflation now peaked? A current study by the Ifo Institute nourishes this hope. The proportion of companies planning to raise their prices in the next three months fell for the third time in a row in July, the institute said on Thursday, citing a survey. “Prices are likely to continue to rise, but the pace will slow down,” said Ifo economic chief Timo Wollmershäuser. However, there are differences between the economic sectors.
While price expectations fell noticeably in the construction, industrial and hospitality sectors, for example, in the food retail sector “there is still no end to the noticeable rise in prices in sight,” said the Ifo Institute. As in the previous months, all retailers surveyed stated that they wanted to raise their prices.
An example of this is Nestlé. The maker of Nespresso, KitKat and Perrier announced on Thursday that it had increased its prices by an average of 6.5 percent in the first half of the year. With the increases, the food company wants to cushion the “unprecedented” increase in the cost of raw materials, packaging, freight and energy. Nestlé therefore increased its sales forecast on Thursday, but the margin and profit were lower than expected.
And a look at the data from the Federal Statistical Office suggests that the times of high inflation rates are not over yet. “Special effects such as the effects of the 9-euro ticket and the tank discount are included in the results,” it says there. When these reliefs end again at the end of August, transport costs in Germany will rise again.
The Pestel Institute has calculated exactly how all of this is affecting the wallets of Berliners. According to a purchasing power analysis presented on Thursday, the sharp increase in energy and food prices compared to the previous year is likely to cost every private household in Berlin this year 908 euros in purchasing power. For comparison: This sum would be higher than the amount that Berliners statistically invested in gifts at last Christmas. According to the data service Statista, according to surveys, this was 458.50 euros for the last festival.
According to the Pestel study, which was carried out for the State of Berlin on behalf of the Food-Genuss-Gaststätten Union (NGG), the population of Berlin will lose around 1.79 billion euros in purchasing power this year – provided that the previous rate of inflation does not continue further on. If one divides the 1.79 billion euros loss of purchasing power among 1.97 million private households in the capital, the statistical loss of purchasing power amounts to almost 909 euros for the whole of 2022.
It should be noted that this is an average value. The union NGG is likely to use the study as an argument for future collective bargaining. Just this month, the organization and the bakers’ guild in Berlin and Brandenburg achieved pay increases of at least 18 percent, and in some cases even up to 44 percent. 14,000 bakery employees in the region benefit from this. Your customers will therefore have to cope with further price increases of around ten percent for rolls and baked goods this year, as the bakers’ guild explained. This is how the wage-price spiral feared by economists works.
On Thursday, the IGG pointed out that people with “small wallets” were particularly affected by inflation: In the almost 882,000 households in Berlin in which single parents and single people live with a monthly net income of less than 2,000 euros, the projected loss of purchasing power – from heating to shopping in the supermarket – to 553 million euros by the end of the year.
An economic analysis presented in July by the German Institute for Economic Research (DIW Berlin) essentially confirmed the thesis that the lower the income, the greater the burden on households. According to this, the ten percent of households with the lowest income would have to spend 5.3 percent more of their net income this year in order to achieve the same level of consumption as in the previous year. With increasing income, the relative additional burden tends to decrease: for the top tenth, the additional burden is only 1.1 percent.
However, the economists from the DIW pointed out a special feature: the state measures help the lowest-income ten percent, but significantly less for those earning more than that. “Especially the lower middle class needs more relief, since their financial leeway for savings in everyday life is very small,” demanded the economists.