Supply bottlenecks as the biggest driver of inflation
Prices have been soaring for months and will continue to do the same in the new year. Supply bottlenecks are the biggest drivers of inflation.
The example of Philippi-Design, which sells decorative items such as lanterns, shows why prices will continue to rise in the future. In China, the production costs for a lantern have increased by 16 percent and the transport costs to Germany have quadrupled. In addition, the price calculation includes a markup for the brand, the trade and also the value-added tax.
The consequence of the increased costs is that the lantern is no longer offered for 99 euros, but since January for a whole 189 euros. Designer and company director Jan Philippi commented on this price increase: “Such a price jump is really unique in our company history.”
Highest price increase for years
But Philippi-Design is not the only German company to suffer such a fate. About two-thirds of all companies plan to raise their prices in the future as well. The Munich-based ifo Institute has not recorded a higher figure since surveys began 30 years ago.
Inflation is on a high after the Corona dip and is reaching historic highs. For example, goods and services cost 5.2 percent more in November than a year earlier. Such a high price increase has not been seen in nearly three decades.
No end to inflation in sight
In the new year, the absence of some Corona special effects will be offset by the addition of some catch-up effects as new inflation drivers.
For example, Philippi-Design says it has taken on the increased costs of various products itself. “Of course, we can’t afford to do minus business in the long run,” Philippi commented. The company chef plans to raise prices by an average of 25 percent in January.
ECB representative Tobias Linzert from the Monetary Policy Department said: “Only when inflation has reached two percent in the medium term, sustainably and permanently, only then can monetary policy act. Only then can interest rates rise again.” This means a negative outlook for the new year, as zero interest rates have been consistent so far. In addition, prices will continue to rise in the coming months.
Source: www.kloepfel-consulting.com