Misperception of Inflation in Germany
A recent study conducted by the pro-employer Institute of German Economics (IW) has revealed that a significant portion of German consumers perceive price increases, particularly in the food sector, to be substantially higher than they actually are.
Key Findings
Based on a representative survey of 3,267 individuals aged 18 and over conducted in December, the study found that:
- Two-thirds of consumers reported that food prices had "risen sharply" in the past 12 months, whereas the inflation rate in this sector, according to the Federal Statistical Office, averaged only 1.9% in 2024.
- Consumers estimated the general inflation rate for the past year at 15.3%, significantly higher than the actual rate of 2.2%.
Cognitive Disconnect
"Prices rose sharply in 2023, but not so much in 2024," said Matthias Diermeier, the study’s author. "Consumers’ perception, however, is that prices have continued to increase significantly. Many do not realize that the rate of price increases has slowed down."
Partisan Divide
The IW researchers also examined the issue of inflation perception in relation to political affiliation. They found that:
- Supporters of the AfD (Alternative for Germany) and BSW (Federal Association of Small Businesses) held more negative views on inflation and overestimated price increases.
- "Our study suggests that supporters of fringe parties distrust official statistics," said Diermeier. "The issue of inflation could mobilize voters on the political fringe during the upcoming Bundestag election."
Long-Term Impact of Inflation
Overall, consumer prices in Germany have risen by 19.3% between 2020 and 2024. The most significant price increases have been in heating fuel (50.3%), fuel (41%), and food (32.8%).
"It is positive and essential that price increases are now more moderate," said Sebastian Dullien, an economist at the Hans-Böckler-Stiftung, a trade union-affiliated research institute. "However, the price level for many everyday goods remains significantly higher than it was three years ago, and prices have not come down."
Dullien emphasized that the shock of inflation has had a profound impact on consumers. "It will likely take several more years for it to dissipate, during which incomes will need to rise faster than inflation."
Conclusions
The study highlights a significant gap between consumers’ perception of inflation and the actual data. This cognitive disconnect could have implications for economic policymaking and the upcoming Bundestag election.
It is important for policymakers to address the concerns of consumers who are feeling the burden of inflation, even if it is not as severe as they perceive it to be. Additionally, efforts should be made to increase trust in official statistics and improve communication about the complexities of inflation.
