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MONEY

Consumers in Germany face widespread price hikes this year

Consumers in Germany are already feeling the squeeze as the cost of living continues to rise - but according to a recent survey from Munich's ifo Institute, more price hikes are on the horizon.

A shopper packs groceries at the supermarket
A shopper loads groceries into a supermarket trolley. Photo: picture alliance/dpa/Ben Pakalski / www.pakalski.de | Ben Pakalski

In December, the ifo’s price expectations index fell just slightly to 44.6 points, down from an all-time high of 44.9 in November.

The figures were based on a survey companies’ forecasts for the next three months, with high values on the index meaning that firms are expecting their costs to go up significantly. 

“Such increases will filter down to consumer prices,” confirmed Timo Wollmershäuser, Head of ifo Economic Forecasts.

As companies grapples with the high cost of energy and other products, these additional overheads are likely to be reflected in higher prices for customers in the next three months, he added. 

According to the ifo, expectations for significant price rises are currently running through all sectors of the German economy.

In retail, price expectations are at 60 points on the index, suggesting that consumers are set to see significant price increases at the shops in the coming months. 

This was closely followed by wholesale businesses with 57 points and industry with 55.

The lowest value, 34 points, applied to service providers – though even this number represented a new record value for the sector. 

High inflation set to continue

The news comes after months of rapidly rising consumer prices in Germany. 

According to the most recent figures, the prices of everyday goods went up by an average of 3.1 percent last year amid supply bottlenecks and soaring energy costs.

This marks the highest yearly average for three decades.

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In the coming months, the inflation rate could rise above the four percent mark and only gradually approach the two percent mark towards the end of 2022, Wollmershäuser said.

“Inflation will decline over the course of this year, but slowly,” he warned. “We now expect a rate of inflation of three and a half percent for the year as a whole.”

Higher inflation weakens the purchasing power of consumers because euros are worth much less than before.

It also devalues people’s savings as interest rates continue to be dwarfed by the rising cost of living. 

According to a YouGov survey commissioned by Postbank, one in nine Germans is struggling to afford everyday expenses like groceries and utilities due to the sharp rise in the cost of living. 

“Since food, energy and fuel have become considerably more expensive, but incomes cannot keep up with the price development, people have much less financial leeway than before,” explained Postbank Chief Economist Marco Bargel.

‘Peak has passed’

Though economists remain concerned about the prospect of rising prices over the coming months, shoppers are unlikely to see the same level of price hikes that they faced in the last months of 2021. 

According to the Federal Office of Statistics, consumer prices rose by 5.3 percent in December compared to the same month in 2020, marking the largest jump in consumer prices throughout the year.

“This means that the peak of German inflation has probably now been passed,” said Sebastian Dullien, scientific director of the Macroeconomic Policy Institute, told DPA.

Compared to November, prices went up by 0.5 percent in the run-up to Christmas. 

READ ALSO: How will the cost of living change in Germany in 2022? 

Member comments

  1. Yupp inflation is a tax on the poor, and with the Greens in charge the clean energy plan will built on the backs of the working poor!

    1. With the situation with Russia and Nord Stream 2, it would be slightly poetic if we ended up having to beg other European nations for some of their nuclear power.

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MONEY

Why are card payments getting rejected in Germany?

People are currently unable to pay by card in a number of major German retailers. Here's what's going on.

Why are card payments getting rejected in Germany?

Since Tuesday, numerous retailers in Germany have been operating under a cash-only policy after a major brand of card payments terminal stopped processing payments.

The problem was initially announced by the Konsum retail chain in Dresden, who wrote on Facebook on Tuesday morning: “Attention, an important notice for you! Due to a Germany-wide malfunction, card payments are currently not possible in our stores.”

According to the latest information from Focus Online, several branches of Netto, Edeka and a handful of Rewe branches are affected by the issues. There have also been reports of problems at Aldi Nord, Rossmann and DM as well as some smaller, independent retailers and petrol stations.

People who have tried to pay by credit card, debit card or EC card at these places have reportedly been turned away. 

What’s going on?

The problems with card payments seem to be linked to a commonly used card payments terminal from US company Verifone. According to reports, H5000 card machines at multiple retailers and businesses experienced a software malfunction that stopped them processing payments. 

“As things stand, it will be necessary to install new software updates on all H5000 terminals, which the manufacturer will provide as soon as possible,” the payment service provider Payone said.

“The disruptions are ongoing,” a spokesperson for financial services provider Concardis said on Thursday afternoon. “We’re still waiting for updates from Verifone.”

As of Friday morning, there was no indication of when the problems would be solved, but the card payments processor appeared to be working on a solution.

“We will soon provide a software update for our customers to fix the problem and will inform our customers as soon as it is available,” a Verifone spokesperson said. 

READ ALSO: How Germany’s EC card is set to go digital

How widespread is the problem? 

According to Verifone, thousands of card machines at different retailers, petrol stations and banks across the country are affected. The H5000 terminal is mainly used in Germany, they added. 

However, the Association of German Banks clarified that, though the H5000 terminals were completely out of action, this specific model only accounts for a small proportion of all card machines in Germany. 

“Network operators and technical service providers are working intensively on troubleshooting,” it continued.

Payments processing service Payone confirmed that it was facing issues with the specific H5000 card machine and said that the issues were happening throughout the country. 

“Like other network operators, we are currently experiencing considerable restrictions in the processing of transactions with card payment terminals of the type H5000 from the manufacturer Verifone throughout Germany,” Payone said on Wednesday. 

Financial service provider Concardis warned businesses not to try and fix the problem themselves by rebooting the devices since the card machines needed to be connected to the network in order for the problem to be solved by the manufacturer. 

He said Payone and Concardis were in contact with Verifone and were working to fix the problem.

What should customers do? 

Since card payments may not be possible, it’s a good idea for people to make sure they have cash on them when they go to the supermarket or petrol station in the near future. 

ATMs are apparently unaffected by the problems, so people should still be able to get access to cash. 

Customers are also being advised to clarify in advance at the checkout whether card payments are possible or not – preferably before picking out items.

If card payments aren’t possible, supermarkets and other shops are likely to put up signs at entrances or near the tills, so customers should keep an eye out for those. Petrol stations generally put stickers and signs directly on the pumps when equipment is out of order. 

If customers get caught out with no cash at a retailer where no card payments can be processed, they will generally have to leave the items behind – though some cashiers will be willing to hold the items for when the customers return. 

Things can get trickier at petrol stations, where identity cards, driving licences and health insurance cards can be retained in the event that somebody fills up their tank and is unable to pay straight away.

In some cases, the police can even be called.

READ ALSO: What to know about starting your personal banking in Germany

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