[Skybird]

[Focus] 2.9 percent - that's how high the inflation rate is expected to be in January 2024 (in Germany). That's great: inflation is under control, now it's just a question of when the central banks will cut interest rates. With inflation so low, we have to be careful not to slip into deflation.
We are a bit strange, aren't we? From September 2022 to February 2023, we always had an 8 before the decimal point, after which things slowly went downhill. But downhill only means that the rates of increase are falling again. The bottom line is that prices are continuing to climb, even though they have already risen like crazy in the last two years!

A simple fictitious calculation to illustrate this:

Commodity A cost exactly 100 euros in 2021.

2021 - 10 percent inflation - 110 euros
2022 - 10 percent inflation again - 121 euros
2023 - 5 percent inflation - 127.05 euros
2024 - 2.9 percent inflation - 130.73 euros.

Raise your hand if you are happy that prices have only risen by 2.9 percent at 130.73 euros. Anyone who can think clearly will be annoyed that the goods have become 30 percent (!) more expensive since 2021.

Now let's take product B, which has risen by four percent every year:

2021 - 4 percent inflation - 104 euros
2022 - again 4 percent inflation - 108.16 euros
2023 - again 4 percent inflation - 112.49 euros
2024 - again 4 percent inflation - 116.99 euros.

Do you understand what I'm getting at? Although the price of product B has recently increased significantly due to four percent inflation, at 117 euros it is significantly cheaper than product A.

Falling inflation rates are all well and good, but with the previous increases, it's just a drop in the ocean... . The experts can say that the "inflation dynamic in Germany has been broken". Sounds great, but people can still afford to live less and less. This is because food prices rose again in January by 3.8 percent, which is enormous. And this is despite the massive rise in prices beforehand, i.e. despite the base effect.

And what is happening now? The Germans are happy that inflation is marching back towards the ECB's two percent target and are keeping quiet? No. They want financial compensation for inflation, i.e. higher wages. It's called a wage-price spiral. Prices are rising, I need more pay to maintain my standard of living. This creates a second-round effect, because companies react to the higher costs caused by wages and the cost of goods with higher prices, making things more and more expensive. And the spiral continues, fueled by the unions. No criticism, they're just doing their job.
What does that mean? Inflation may return sooner than many people think. It is far too early for a swan song. And anyone who is already conjuring up the dangers of deflation is frankly beyond help.

And for those who are now emphasizing that we can afford these wage increases: Germany is sliding into recession for a reason. Unfortunately, that is the case. Among other things, we are paying significantly more for our hunger for energy abroad. As a result, there is less to distribute in this country. Or to put it another way: we are becoming poorer as a nation. And if inflation picks up again, many people will soon be walking through the dark forest whistling.