A new survey from the ifo Institute for Economic Research, a Munich-based research firm, has predicted huge price increases across the country over the next three months as Germany’s dependence on gas and Russian oil is turning against them. The company warned this morning that German inflation could reach 5% in 2022.
Timo Wollmershäuser, head of forecasts at ifo, said: “Russia’s invasion of Ukraine could drive up gas and oil prices even further, with a subsequent effect on many other consumer prices.
“Right now, it’s becoming more likely that the inflation figure for all of 2022 will start with a five rather than a three.”
The price expectations index recorded a new high of 47.1 points for the month of February.
This marks a steady price increase of 44.7 points in December and 46.1 in January.
These “enormously high” values apply to all sectors of the German economy.
This was extremely important for retail, which recorded a total of 63.3 points – with food retail reaching a whopping 85.9 points.
Wholesale trade followed shortly after with 62.4 points and industry with 55.8 points.
The only sector to have seen a drop in prices was that of service providers, with a slight drop from 41.9 to 38.6 points.
Points for price expectations indicate the percentage of companies that intend to raise prices overall – comparing companies that intend to raise prices with those that do not.
One hundred points for an industry would indicate that every firm in that industry intends to raise prices. This does not take into account the extent to which the company aims to increase its price.
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The high number of price increases can be partly attributed to Germany’s dependence on Russian gas.
The country receives 55% of its gas imports from Russia.
Germany recently canceled plans for Nordstream 2, a second Russian pipeline to supply them with gas. Dmitry Medvedev, the former Russian president and prime minister who is now deputy chairman of the country’s Security Council, taunted Germany for the move in a tweet.
He said: “Well. Welcome to the brave new world where Europeans will very soon be paying €2,000 for 1,000 cubic meters of natural gas!”
Hanns Koenig, energy market analyst at energy consultancy Aurora, told Politico the threat would mean “more than doubling the price level of the past few days, which is already exceptionally high.”
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Mr Koenig said: “However, I suspect he simply meant to quote a high figure – I don’t interpret this as a specific price target, but rather as a signal that Russia is willing to maintain the European market for tight gas for years to come.”
Despite the cancellation of Nord Stream 2, the first Nord Stream, established in 2011, still supplies Germany with much of its gas from Russia.
Speaking at the Munich Security Conference last weekend, German Chancellor Olaf Scholz said “we all have to work very hard to create a situation where we have alternatives” to energy imports from from Russia.
Additional reporting by Monika Pallenberg
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