3.9 percent price increase in August – the alarm bells rang among consumers. Politicians tried to use the numbers for their purposes in the election campaign. Economists, on the other hand, urge calm.
The economists of leading financial institutions in Germany do not currently see the increased risk of a prolonged or even out of control price spiral.
“Inflation has gone into turbo mode in 2021, but it will probably run out of air again in 2022,” said Katharina Utermöhl, an economist at the Allianz Group, in a survey by the German Press Agency. Marc Schattenberg from Deutsche Bank Research stated: “The currently observable increased monthly inflation rates are largely determined by temporary influences.” He expects that inflation in the euro area will level off around the target of almost two percent set by the European Central Bank in the next few years.
Veronika Grimm, too, is assuming a normalization of the economy, although the price-driving effects such as the shortage of microchips or the high raw material prices will not disappear as quickly as hoped. “As long as the wage agreements remain moderate, there is not much to suggest that we run into permanent inflation,” she said. “In some areas, wages can certainly rise, for example due to the shortage of skilled workers, but the temporarily high rates of inflation should not be taken up 1: 1 in the collective bargaining.”
Numbers are not necessarily comparable
In August, the inflation rate in Germany was 3.9 percent and was therefore significantly higher. However, this is also due to base and special effects, because inflation was particularly low last year at 0.5 percent, primarily due to the effects of the corona pandemic. Among other things, the temporarily reduced VAT alone ensured a lower price increase.
In order to get into a galloping price surge, there must be further effects, such as a price-wage spiral, said Katharina Utermöhl. “This is not in sight,” she emphasized. “I currently see no reason why a visit to a restaurant should cost more in the medium term.”
Economists expect German economic output to grow by a good three percent in the current year. “In the next year we expect an even stronger growth of 4.3 percent,” said Schattenberg. “Demand from private households is already brisk, but there is still pent-up purchasing power,” emphasized the expert from Deutsche Bank Research. “We can also see that short-time work has fallen sharply over the summer.”
Labor market on the right course
Overall, the labor market should have developed positively in September, said Schattenberg. The number of unemployed could fall again by around 110,000, seasonally adjusted by 30,000. The Federal Employment Agency will announce its September figures next Thursday (September 30th). In August around 2.58 million people nationwide were out of work. The unemployment rate was 5.6 percent.
Fritzi Köhler-Geib, chief economist at the state-owned banking group KfW, also anticipates positive developments on the labor market. “In 2022, the strong recovery on the labor market will then likely be fully reflected in the figures: According to our forecast, we will again have half a million more people in employment than this year, and the unemployment rate is likely to be considerably lower at 5.3 percent”, she stressed. It could already fall to 5.7 percent this year – but only if there are no further restrictions, at least for those who have been vaccinated, in the wake of the corona pandemic.
There is still a shortage of skilled workers
Veronika Grimm, a member of the Federal Government’s Advisory Council, also sees limiting factors for the economy in the labor market – for example, when it comes to supplying companies with specialists. “There was almost no immigration during the corona crisis,” she said, referring to the international exchange that practically came to a standstill during the corona pandemic.
This has led to a labor shortage in some industries such as the hotel and restaurant industry. Employees have also reoriented themselves, for example in the direction of retail, and are therefore no longer available in the hospitality industry. “The employers will also have to improve their wages,” stressed Grimm, with a view to possibly better pay and working conditions.
With regard to economic performance, the Nuremberg professor does not believe that there will be a complete recovery from the consequences of the corona pandemic quickly. “I think we will keep a kind of 90 percent economic activity in the service sector,” she said.
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
