The results of a study published by the Ifo Institute showed that in March, the price expectations of German companies reached their lowest level since March 2021 - the corresponding index was 14.3 points compared with 15.0 points in February.
“Inflation is still on the decline and should fall below 2% this summer. From a German perspective, there’s no reason why the ECB shouldn’t cut interest rates soon,” says Timo Wollmershäuser, Head of Forecasts at ifo.
According to official data, in February, consumer price growth slowed to 2.5% per year, as expected, from 2.9% per year in January. This is the lowest value since June 2021. On a monthly basis, consumer prices rose by 0.4%, as expected, after increasing by 0.2% in January. February's growth was the sharpest since April 2023. Meanwhile, the CPI excluding energy and food rose by 3.4% per annum (the lowest value) after a similar increase in January. Destatis said that in February, the harmonized index of consumer prices (HICP) - an indicator that allows to compare inflation in Germany with inflation in European countries - rose by 0.6% on a monthly basis and by 2.7% per annum. In January, HICP fell by 0.2% m/m and rose by 3.1% per annum. March inflation data will be released later today (at 12:00 GMT), and economists expect CPI growth to slow to 2.2% per annum from 2.5% per annum in February.
The Ifo institute also said that fewer companies are planning to raise their prices, particularly in consumer-related industries (24.6 points, down from 28.7 points). Price expectations fell in retail (to 25.4 points from 29.5 points) and in the hospitality industry (to 29.5 points from 54.4 points), while there was a slight increase among hotels (to 33.4 points from 31.7 points) and tour operators (to 36.9 points from 36.6 points). In construction, price expectations fell to -10.6 points from -6.2 points. In manufacturing, price expectations rose to 6.4 points from 5.0 points.