Dining and shopping sectors: Businesses aim to hike prices

Germany's consumers may face higher costs as 2024 begins, with numerous businesses considering price hikes in the near future. The Munich-based Ifo Institute reported on Wednesday that its survey, encompassing thousands of firms, showed an uptick in their price projections. The index measuring these expectations rose from 18.1 points in November to 19.7 points in December. Timo Wollmershäuser, the chief economist at Ifo, remarked, "This suggests that the deceleration in inflation may come to a pause."

A notable surge in price anticipations was observed among service providers catering to consumers, with the index jumping to 37.3 points in December from 25.5 the previous month. Particularly, restaurant owners are eyeing significant price increments, with their index soaring to 87.6 points in December, up from 45.9 in November. Starting January, the reduced VAT rate on food, introduced during the pandemic and the spike in energy prices following geopolitical tensions, will revert from 7% back to 19%.

Furthermore, the Ifo analysts highlighted that retailers are also gearing up for price adjustments. The manufacturing sector isn't left behind either, as more enterprises in this domain are contemplating price raises, marking a rise in their index to 3.6 points.

The construction sector, however, tells a slightly different story. While still indicating a decline in prices, the deceleration has been less pronounced. The price projection for this sector improved to minus 1.0 points in December, from a more negative value of minus 4.2 in the prior month.

Despite a recent slowdown in consumer price growth, which recorded a 3.2% increase in November - the most sluggish pace in over two years - the Federal Ministry of Economics remains cautious. The ministry's latest monthly report predicts a potential temporary surge in price hikes in the coming months, attributing it to the impact of last year's measures designed to curb inflation.

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