Tuesday , 21 May 2024
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Global Economy

Inflation: tighten your belts, economists advise

Prices are rising everywhere – for energy, for food. And incomes aren't keeping up. The result: less fuel in the tank, less food in the shopping bag for the same work – economists call this a loss of real wages. Whatever they say, better for people to get used to it, because it could become the new normal. In the words of the Deutsche Bundesbank:

SOCIAL DISPOSITIONS

"In view of persistently high prices for raw materials, transport services and other primary products, consumer prices are likely to rise sharply in the coming months," said the central bank in its monthly report for May. "Against the background of strong inflation at the upstream stages, the average inflation rate for the current year should be around 7 percent from today's perspective."

The collective wages, including special payments, cannot keep up. In Germany, they were on average 4.0 percent higher in the first three months of the current year than a year ago, according to the Federal Statistical Office.

Less in tank and bag for the same work – in Belgium, local public transport and administration, schools and garbage disposal are on strike this Tuesday against the loss of purchasing power.

The International Labor Organization (ILO) of the United Nations pleads not to whine, to cushion social upheavals.

Guy Ryder, ILO Director-General:

"We talk about the need to protect the most vulnerable, those facing the greatest difficulties. And the need for governments to address social issues. We advocate dialogue, bringing together governments, employers and workers to find acceptable solutions in Finding situations that are undoubtedly very difficult. That contributes to the legitimacy and acceptance of solutions."

The inflation rate in the euro area continued to rise in May: consumer prices rose by 8.1 percent compared to the same month last year, according to the European statistics office Eurostat (first estimate). In April, the inflation rate in the euro area was 7.5 percent.

In Germany, inflation had recently jumped to its highest level in almost 50 years at 7.9 percent.

Inflation rates of this magnitude have never existed in reunified Germany. In the old federal states you have to go back in the time series to the winter of 1973/1974 to find similarly high values. At that time, mineral oil prices had risen sharply as a result of the first oil crisis.

According to the Federal Statistical Office for Energy, consumers had to pay 38.3 percent more in May 2022 than a year ago, groceries increased by 11.1 percent.

250 EUROS MORE FOR DINING

The further prospects:

According to current calculations by the credit insurer Allianz Trade, people will probably have to pay significantly more for groceries in the coming months.

"In Germany, food retail prices are likely to rise by more than ten percent in 2022," says Aurélien Duthoit, retail expert at Allianz-Trade. This corresponds to an average additional cost of 250 euros per capita per year.

Inflation rates of 2 to 2.5 percent could only be closer to the target set by the European Central Bank (ECB) again from the beginning of 2024, says Jörg Zeuner, chief economist at fund provider Union Investment. The ECB is aiming for stable prices at 2.0 percent inflation in the medium term.

Who should pay for this? A good one in three consumers now doubts that it is enough for them. One in seven is considering filling the gap with a loan. Just stupid: Interest rates are also supposed to rise – to keep inflation in check.

In a survey commissioned by the credit agency Schufa, 38 percent of the 1,000 respondents stated that they were finding it increasingly difficult to afford everyday items. 14 percent – four percentage points more than in January – believe they will probably have to take out a loan to maintain their standard of living.

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