für die Wirtschaft Despite declining inflation, further economic danger remains.

Last Updated: 20. November 2023By

Politicians and central bankers presented the fact that inflation in October was „only“ 3.8% as a great success. It was reiterated again and again that the inflation rate was almost 9% a year ago. The measures to combat inflation were said to work as expected.

Mention was made in passing, if at all, that inflation of almost 4% is approximately twice as much as the European Central Bank wants to achieve, namely 2%. Inflation is still much too high.

Prices continue to rise, but more slowly An example calculation of food prices shows that we still have to dig much deeper into our pockets when we need things for daily use. If you filled your shopping cart with food and drinks in the autumn of 2021, you had to pay 100 euros for it. A year later, the same selection cost 17 euros more. Now 125 euros are due. Instead of 17, it is „only“ 8 euros more. Prices are still rising, but more slowly than a year ago.

Of course, falling inflation is good for Germany, but our country is still in a deep crisis. According to tagesschau.de, the International Monetary Fund has also warned against speaking too soon of a relaxation of the situation.

In an analysis of past „inflation shock processes since the 70s“ it says: In less than a third of the cases of high inflation, the inflation rate dropped again within five years to the desired level, even „successful“ processes took more than three for this.

In other words: The topic of inflation is still far from being checked off for the citizens of Germany.

Why prices continue to rise Philipp Harms, economist at the Johannes Gutenberg University in Mainz, explains on tagesschau.de that there are delayed effects, for example wage settlements. These were based on price increases for energy and food and had long-term effects. The high wage then leads to cost pressure, which is passed on to the customers – a so-called second round effect.

There are also possible pitfalls around the labor market. Due to the shortage of skilled workers, many companies are holding on to their employees despite a weak economy. Employers think they can’t afford to lay off because there won’t be any new applicants when the economy picks up, but: More employees for the same product costs money.

The higher unit labor costs could be passed on to consumers. The situation is particularly precarious because the economy is weakening further and there is no improvement in sight.

In addition, the influence of global crises is added. Furthermore, the exchange rate of the dollar plays a role. Germany imports many goods that are traded in dollars. If the euro depreciates against the dollar, we have to pay more than before. In addition, the effects of climate change are increasingly taking their toll.

Why caution is advised and what you should do The decreasing inflation is a ray of hope at the end of the tunnel, nothing more. We are still deeply in crisis and your assets are at risk. Therefore, you should take measures to protect your assets.