German customers are facing higher pricing for items across the board as more firms in Europe’s largest economy opt to pass on their higher manufacturing costs to customers as a result of widespread supply constraints and a rise in energy prices.
While the development is assisting companies in improving corporate margins following the coronavirus shock, consumers are feeling the pain of rising prices, which might harm household spending and, eventually, domestic demand if wage growth does not keep pace.
One on two industrial firm in Germany is already getting ready to raise prices for consumers owing to continuing supply shortages, a record high, according to the Munich-based Ifo institute’s latest business sentiment poll.
Consumer price inflation, which has been synchronized so that it can be compared to other eurozone nations, increased to an unprecedented 4.1 per cent year on year in September, with figures due later on Thursday anticipated to show a further climb to 4.5 per cent in October.
The government predicts national inflation to hit 3 per cent in 2021, the highest level in over three decades, before falling to 2.2 per cent in 2022 and 1.7 per cent in 2023.
The government anticipates that, as a result of state aid measures to mitigate the consequences of the epidemic, consumers’ disposable income would grow by 2.5 per cent this year and 3.8 per cent next year, helping to stabilise domestic demand despite the price increase.
However, many customers are feeling the effects of the abnormally high inflation, with concerns mounting that the price increase will not be only transitory, as central bankers have stated.
It wants to hike beer prices in two stages next spring for both the hospitality and retail businesses owing to rising utility, shipping, and raw material expenses, the Radeberger Group, Germany’s largest brewery, said.
“These cost increases can no longer be compensated for by simply increasing efficiency,” a Radeberger spokesperson said.
“We therefore feel compelled to pass on these cost explosions with a sense of proportion, at least in part, in our sales prices,” the spokesperson said.
Plans to increase beer prices in spring have also been announced by other large breweries, including Krombacher and Veltins.
A shortage of semiconductor chips and other electronic components is driving up production costs in the automotive industry, which has consequently slowed down output and allowing manufacturers such as BMW to offer lower discounts than usual.
When presenting the government’s revised growth forecast on Wednesday, Economy Minister Peter Altmaier stated that auto makers are now unable to produce hundreds of thousands of vehicles owing to a shortage of semiconductors.
Because of the restricted supply and output, automobile manufacturers must make less price reductions when selling new models and reselling leasing vehicles.
“BMW and Mercedes are compensating a large part of the lost volume with a better product mix and higher prices,” analysts from Stifel Research said in a research note.
Nivea maker Beiersdorf, forklift manufacturer Jungheinrich and construction material specialist HeidelbergCement are among the other German companies that are planning to pass on the higher raw material and energy costs to customers and clients.
German consumer manufacturer and sportswear company Puma said that its products could be pricier in the second half of 2022 because of supply chain constraints which has been exasperated by higher raw material costs.
(Adapted from DevdisCourse.com)