German companies signal price increase

German companies are increasingly tending to raise prices, as the ifo price expectations index climbed to 15.9 points in October, up from 14.1 points in September, which is particularly evident in the manufacturing, trade, and business-related services sectors.

This uptick suggests that inflation may soon approach the European Central Bank’s target of 2 per cent, according to ifo economic expert Sascha Möhrle.

The retail sector saw a notable rise in price expectations, climbing to 21.4 points from 19.1, as more retailers indicated plans to raise prices. In contrast, consumer-related service providers experienced a drop in expectations, falling to 18.5 points from 22.0, marking the lowest level since April 2021.

Möhrle highlighted that high wage costs in the service sector are contributing to inflation, which currently stands at just under 4 per cent.

Meanwhile, industry and business-related service providers, including wholesalers, reported an increase in their price expectations, with indicators rising to 7.5 and 18.8 points, respectively, from 6.3 and 18.0 in September.

In the construction sector, however, expectations shifted downwards, with companies anticipating lower prices, as the indicator fell to -3.0 points from -1.0.

The points for the ifo price expectations indicate the percentage of companies that intend to increase prices on balance. The balance is obtained by subtracting the percentage of companies that want to lower their prices from the percentage of those that want to raise their prices. If all the companies surveyed intended to increase their prices, the balance would be +100 points. If they all wanted to lower their prices, it would be -100. The balance was seasonally adjusted. The ifo Institute does not ask about the amount of the planned price change.

Attribution: ifo

Subediting: M. S. Salama