Inflation pessimist Germany - Now the big savings begin

More and more consumers in Germany can hardly afford the high costs for energy, food and services. More than three quarters of consumers now have to limit themselves when shopping, according to the current Future Consumer Index from the consulting company EY, which is exclusively available to WELT.

At the same time, half of the 1,000 respondents stated that they could only buy the bare essentials. "Due to inflation, consumers' means are now much more limited and the income available for consumption has shrunk accordingly," says Michael Renz, Head of Consumer Goods and Retail at EY Germany. "Consumers therefore have to save on numerous products."

Sellers of fashion and consumer electronics are particularly affected. After all, 56 percent of those surveyed say that they currently buy little or no new clothing. The same applies to the consumer electronics sector with, for example, televisions, smartphones, laptops and game consoles. Here, too, 56 percent of German consumers report that they are currently holding back or not buying such products at all.

But petrol stations and pharmacies are now also often avoided, according to the study. "Almost every second person currently fills up less, and more than every fourth person says they save on medication," says the study.

But that seems to be just the beginning. In any case, EY reports on further savings plans by households in the coming months. At the top of the list are orders from delivery services. Half of the consumers in this country want to order less prepared food and resort to the services of food suppliers less often.

At the same time, consumers have identified savings potential in leisure activities: for example on holiday trips, visits to restaurants, bars and cinemas, membership fees for fitness studios or the number of streaming services booked.

On the other hand, respondents plan to spend more money on buying groceries and hygiene items. This is anything but voluntary, but rather due to the general expectation that prices will continue to rise. An impressive 96 percent of the participants in the Future Consumer Index assume further increases in products and services within the next six months, above all in the areas of energy, fuel and food.

And this assumption is no accident. The inflation rate in Germany has been reaching new record highs for months. And according to the Federal Statistical Office, the biggest drivers have always been the energy and food sectors. In October, for example, there were premiums of 43 percent for energy products and 20.3 percent for food compared to the same month last year.

A current survey by the Munich ifo Institute also suggests that it will be even more expensive at the supermarket checkout. In any case, two out of three food manufacturers and 38 percent of the beverage producers plan to pass on increased purchase prices in the coming months. "So far, companies in Germany have been slow and incomplete in passing on their increased purchase prices to customers," says the study, which is not limited to food.

According to the ifo experts, only 34 percent of the increased raw material and production costs were passed on to the economy as a whole. Weak demand, competitive pressure and long-term contract terms have had an inhibiting effect so far, it is said to be the justification.

According to the survey, however, the companies now want to pass on their high costs more intensively in the coming months. "This is likely to lead to further inflationary pressure on consumer prices in the coming months," predicts ifo researcher Manuel Menkhoff.

Although there are now also first signs of relaxation. For example, the upward pressure on prices at the manufacturer level has weakened significantly. Producer prices also rose noticeably in October, with the Federal Statistical Office reporting an increase of 34.5 percent compared to the same month last year. In September, the corresponding comparative value was still 45.8 percent. And in a monthly comparison, producer prices even fell for the first time since May 2020, specifically by 4.2 percent.

Experts are surprised by this. Jens-Oliver Niklasch from Landesbank Baden-Württemberg even calls this development spectacular. "Perhaps the first sign of some cyclical easing of price pressures."

From the point of view of analysts, however, the inflation problem is far from over. Despite this weaker momentum in producer prices, there is still no sign of a quick end to the high inflation in Germany. But hardly anyone seems to expect that. In any case, Germans are pessimistic about the future, as EY's Future Consumer Index shows.

Also in the long term. After all, 52 percent of those surveyed assume that the living situation in Germany will deteriorate in the next three years. This means that people in this country have a much more negative attitude than the international average, which is 32 percent.

EY surveyed a good 21,000 consumers in 27 countries. It is striking that the basic mood in Europe is significantly worse than in other regions of the world, such as the USA, India or China.

In the People's Republic, for example, 60 percent believe their lifestyle will improve and only 6 percent believe it will get worse. In the USA, on the other hand, 50 percent expect a positive development and only 25 percent expect it to get worse.

In Europe, the Swedes in particular are still comparatively optimistic. The negative mood also predominates among the British, Dutch and Italians, albeit with a better tendency than in Germany. For France, on the other hand, EY reports even greater concerns for the future than for Germany.

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