Household inflation expectations rise in December

Households in Germany are expecting the rate of inflation to increase, according to findings from the Bundesbank Online Panel Households at the end of last year. Survey results from December 2020 indicate that individuals are expecting inflation to come to 3.1% on average over the next 12 months, which is the highest rate measured in 2020. Inflation expectations had previously dropped from 2.8% in June to 2.5% in November. A number of factors might be behind this uptick in expectations, one being the expiry of the temporary lowering of VAT rates at the beginning of 2021. Another could be the rollout of carbon pricing for fuels, heating oil and gas, a presumption that is supported by the survey finding that more than one in three households reported in December that they are expecting petrol prices to rise sharply in 2021, compared with fewer than one in four in previous months.

The Bundesbank Online Panel Households is a representative survey conducted online by the Bundesbank’s Research Centre each month since April 2020 to identify the expectations of around 2,000 individuals regarding selected economic indicators such as inflation, interest rates, rents and real estate prices. Findings from this survey are published on the Bundesbank’s website at regular intervals. The Bundesbank uses data from this survey to improve the body of information on economic expectations in Germany to help it perform its tasks. Household expectations feed into prices both directly and indirectly via consumption and investment, and price stability is the primary objective of the Bundesbank and the Eurosystem.