GBP Monitor April: No All-Clear for Inflation in 2024

In December 2022, the German Bundesbank predicted a significant decline of the inflation rate to 4.1 percent for 2024. According to the April report of the German Business Panel (GBP), however, it is too soon to give the all-clear.

Despite the prognosis, companies are still expecting an inflation rate of more than 8 percent for 2024 and are increasing their prices further. Energy-intensive companies are not the only ones planning to substantially increase their prices. They justify the increase in prices with higher costs for material, energy, and labor. If the current negotiations of collective bargaining agreements In the fall and winter of 2022, companies expected an inflation rate of 11.4 percent. Since the beginning of the year, this number has declined. According to the current GBP report, companies now expect an inflation rate of 9.3 percent. But in contrast to the common forecasts, the companies participating in the survey do not expect that the inflation rate declines quickly and considerably. For 2024, companies are still expecting a high inflation rate of more than 8 percent. This is considerably higher than the Bundesbank’s prognosis (4.1 percent). “The large difference between the prognosis and the companies’ expectations shows that higher costs must be expected, despite the energy prices which have dropped considerably”, explains Professor Davud Rostam-Afschar. “Two thirds of the companies are planning to increase their sale prices in the next twelve months, on average by 12.6 percent”, says the academic director of the GBP at the University of Mannheim.

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