German firms planning fewer price hikes in sign of cooling inflation

Germany's ifo Institute sees signs that inflation is easing, after companies' so-called price expectations fell for the second consecutive month in June, dropping from 30 to 26.4 points.

This means fewer companies are planning to raise their prices, according to the Munich-based economic research institute. 

Setting aside the end of a fuel price subsidy - which experts predict will be felt in July - this suggests that the major wave of price increases has passed, said Timo Wollmershäuser, head of forecasts at the ifo Institute. 

"Falling energy prices, further fuelled by hopes of peace in the Middle East, seem to have made companies in Germany more confident about the economic situation," Wollmershäuser said.

He stopped short of sounding the all-clear, however, warning that producer and consumer prices are likely to continue to rise in the coming months. 

Since March, price expectations have remained well above the average of 18.3 points for the years 2023-25, the institute said.

The price expectations are based on an ifo survey. The index measures the share of companies planning to raise prices in the coming months against those planning to cut them. Ifo does not ask by how much prices will be raised or lowered.

Price expectations have fallen significantly among energy-intensive companies, with the indicator dropping from 41.2 to 30.2 points. But price pressure has eased to a lesser extent - from 30.3 to 27.1 points - among non-energy-intensive companies. Price expectations have also fallen slightly in the services and retail sectors, as well as in the manufacturing sector.

According to the institute, there are also signs of some easing in the food sector: food manufacturers are planning to lift prices far less often, with the indicator falling from 19.6 points to 12.7. Price pressure in the food retail sector also eased from 55.3 to 48.5 points - though this figure is still considered to be high.