Fear of inflation is apparently decreasing again

I.In the Corona lockdown in spring, the number of people who feared a significant rise in inflation had apparently increased noticeably. In the meantime, however, it seems to be normalizing somewhat. This is the result of monthly surveys with which the Deutsche Bundesbank has been investigating the expectations of households in Germany with regard to various economic data for some time. Many people in Germany had also expected a possible drop in property prices due to the corona crisis in April. In the meantime, however, around two thirds of the households surveyed are expecting real estate prices in Germany to rise again. Fears about possible income losses have also tended to decline somewhat. In May, the respondents expected on average that their monthly income would fall by 115 euros in the next twelve months.

For the new “Bundesbank Online Panel Households”, the Bundesbank’s research center surveys 2,000 households a month. It started last year, but the program has been running officially since April. The Bundesbank reported the results for the first time on Wednesday.

Worries rise after relief efforts

According to the Bundesbank, the Germans’ propensity to consume, i.e. the willingness to spend additional money, remained unusually stable, but the areas of expenditure during the crisis understandably shifted away from travel and leisure activities to everyday goods, for example.

With regard to the crisis measures taken by the European Central Bank (ECB) and the states of Europe, the surveys initially revealed an unusual result. After one of the spectacular steps of the Corona aid measures, the question was asked whether the citizens expected rising or falling incomes for themselves and how they assessed the further development of the gross domestic product. It emerged that the respondents assessed both the outlook for their own economic situation and that for the economy as a whole as worse than before after every crisis measure and monetary policy easing.

“Signal effect” of ECB policy

The scientists apparently wondered why that was so. After all, the crisis measures should actually help improve the situation. The scientists ruled out the possibility that people had not understood the measures correctly and that it was due to a lack of information, because the phenomenon also occurred with relatively simple and transparent crisis measures. The interpretation that made the most sense to them and that has already appeared in the literature: The crisis measures and the monetary easing of the ECB had primarily had a “signal effect”: people thought, so to speak, that if something like this is necessary, the situation must be really very serious. It showed that households with easy access to credit reacted more pessimistically to the aid measures than poorer households who were denied such access.


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