34 percent "perceived inflation" - Germany is threatened with dangerous dynamics

Inflation in Germany rose to an average of ten percent in September. This is the highest price increase since 1951, when the inflation rate in Germany was 10.5 percent. However, a completely different price increase is registered with consumers. According to a survey by the International University (IU) based in Erfurt, the perceived inflation among Germans is 34.2 percent.

The reason for the large difference between officially measured and individually perceived inflation: "We always perceive inflation where we have consumer spending," says Johannes Treu, Professor of Business Administration at IU. People are interested in what they have to pay every day to meet their basic needs.

"If we notice every time we go shopping that the shopping basket is becoming more expensive, we tend to overstate the real increase overall," says the economist. People are much more aware of the prices for everyday things like electricity, gas and groceries.

For the official statistics, the prices are recorded in a defined basket of goods that has not changed over a long period of time and contains various representative goods and services. This guarantees comparability, but has the disadvantage that the shopping cart also contains items that are rarely or never bought individually. But for things that you buy every day, the price increase is registered very precisely. Given the explosively rising prices for food, fuel and energy, it is therefore not surprising that the perception of inflation is three times higher than the official statistics.

For women, the perceived price increase is even 39.3 percent. Men, on the other hand, only registered a price increase of 29 percent. The representative survey took place in mid-September. At that time, the inflation rate reported by the Federal Statistical Office for August was just 7.9 percent.

It is not yet known whether the increase to ten percent has also increased perceived inflation. But it's likely. Because four out of five respondents see no end to the current inflation. Specifically, 86 percent of women and 79 percent of men expect prices for goods and services to be “much higher” or “higher” in October than they were in September.

The rising prices are a concern for 92 percent of those surveyed, with more than half even citing major concerns. "If I have the feeling that inflation is high, I automatically expect it to get even more expensive," explains Treu. Companies took advantage of this, because because of these expectations they would raise prices even more and unions would then also demand higher tariffs.

But such expectations can trigger a classic wage-price spiral. According to Kerstin Bernoth, researcher at the German Institute for Economic Research (DIW), this effect is based less on actual structural factors than on psychological dynamics. If consumers, but also companies, assumed that prices would continue to rise, people would prefer to make purchases and demand higher wages.

Companies, in turn, would raise their prices if they expected to have to pay higher wages and higher producer prices. "Higher inflation expectations can become a self-fulfilling prophecy and boost actual inflation," said Bernoth.

In its survey, the IU also wanted to know where the Germans are tightening their belts significantly - and where less. According to this, four out of five respondents cut back on energy costs, around a quarter on the purchase of new household items, as well as on trips and hotels. According to the survey, the least savings are in education.

Even when it comes to entertainment and enjoyment, budgeting is less pronounced: 24 percent of those surveyed did not go without media and entertainment or alcohol and tobacco products (21 percent). But no matter what area of ​​expenditure was asked about, one constellation always remained unchanged: women limit themselves more than men.

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