A small ray of hope for consumers in Germany: for the first time since July, inflation has weakened somewhat.
(Photo: obs)
A slight drop in German inflation to 10.0 percent gives some hope. Nevertheless, 2022 is the year of inflation.
But 2023 will be the year of upheaval: After everything that is foreseeable, we will then see a recession, but also a noticeable slowdown in price dynamics and at least a more cautious monetary policy again.
In any case, the risks remain high. And the greatest danger – not only for the markets – comes from the Ukraine war. Is an end to the armed conflict foreseeable for 2023? Or is there no end in the long run? Will there even be a catastrophe? Any prognosis must remain vague.
Perhaps the situation will be a little clearer next spring. The following scenario has often been heard and read for some time: inflation will remain at a higher level for longer, driven primarily by the conversion of the economy to climate-friendly energy, more expensive supply chains and demographics that are leading to a shortage of skilled workers. Some of these considerations existed before the most recent surge in inflation, but they received less attention then.
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This scenario is not undisputed. When it comes to demographics, a look at Japan is enough to see that an aging society can go hand in hand with falling inflation rates.
But unfortunately also with low growth rates. And in the case of renewable energies, it should not be overlooked that the marginal costs of production there are often very low. The conversion could even lead to significant relief.
Inflation was overestimated for a long time before today’s crises erupted, then underestimated – and now it may be overestimated again from a long-term perspective.
More: Olivier Blanchard sees chance of falling inflation