German companies plan to increase prices further: ifo Institute

Berlin, Sep 8 (IANS) The ifo Institute for Economic Research has said that price expectations for the coming months in Germany stood at 47.5 points in August, down slightly from 47.6 points in July, which indicates that "the German companies want to increase their prices on a large scale".

If all the companies surveyed intended to increase their prices, the seasonally adjusted balance would be plus 100 points, Xinhua news agency reported.

For food, the indicator stood at 96.8 points in August. Down from 99.4 points in July. High wholesale prices are affecting the entire food sector, and restaurants and bakeries in particular are additionally burdened by the soaring gas and electricity costs.

"Unfortunately, an end to the wave of inflation is not in sight," Timo Wollmershaeuser, head of forecasts at ifo, warned. "So far, energy suppliers have borne the brunt of the sharp increases in market prices for electricity and natural gas, passing on only a small proportion to their customers."

After falling for two months, inflation in Europe's largest economy hit a record high of 7.9 per cent again in August, according to preliminary figures released by the Federal Statistical Office (Destatis). Prices for food rose more than twice as fast as overall inflation.

Since utilities are starting to pass on the high costs to their customers, Wollmershaeuser expects to see "double-digit inflation rates" in the coming months. This would prompt Germany to "curtail their consumption" and lead to overall economic output to "contract in the second half of the year."

More than 90 per cent of German companies regard the current price level of energy and raw materials as a "strong or existential challenge," according to a company survey published by the Federation of German Industries (BDI) on Wednesday. Back in February, the figure was around four times lower.

"Our survey shows that the extremely rising energy prices are presenting the industry with fundamental problems," BDI President Siegfried Russwurm said, calling on policymakers to "take action now to prevent insolvencies and further economic and social unrest."

Since the start of the Russia-Ukraine conflict, energy prices have risen particularly sharply and continue to have a "substantial impact on the high inflation rate," Destatis noted. As Europe is bracing for winter, one-month TTF (Title Transfer Facility) gas price prices are trading more than four times as high as a year ago.