inflation rates
What is inflation?
Inflation means a sustained increase in prices and the associated loss of purchasing power, which is accompanied by an additional devaluation of money. Inflation occurs when the money supply grows disproportionately compared to the real supply of commodities. The consequences of inflation are rising prices for consumer and capital goods. The price index for the cost of living, the consumer price index, is usually used as an indicator.
Who determines the inflation rate?
In Germany, the inflation rate is determined by the Federal Statistical Office Destatis. This authority, which is assigned to the Federal Ministry of the Interior, collects, collects and analyzes statistical information on the economy, society and the environment. The processed information is published daily in around 390 statistics. The inflation rate is determined monthly and calculated for the entire year.
How is inflation determined?
The Federal Statistical Office calculates the inflation rate with the help of the increase in the price level and thus the depreciation of money. This shows the percentage changes in the price level that have occurred within a specific period (month, year). The consumer price index is the most commonly used measure of inflation. The index of inflation is calculated using a basket of 750 major types of goods purchased by private households in Germany, which is representative of an average household – in Germany 2.3 people – in a given year. Depending on the buyer’s shopping basket, whether family, single or pensioner, there are different weights in the basket. The resulting prices of all goods are compared with those of the previous year, which ultimately results in the inflation rate.
Causes of inflation?
There are various factors that can lead to inflation. A distinction is usually made between demand and supply factors. Demand inflation occurs when the aggregate demand for goods exceeds the supply of goods over a longer period of time. The scarcity of goods tempts companies to raise prices. Supply inflation, on the other hand, is based on cost increases in the area of production, such as wage increases, higher energy and raw material prices or interest rate increases, which are passed on by companies to end consumers via the prices of the goods on offer.
Impact of inflation?
Inflation affects the level of employment, the distribution of income and wealth, and a country’s economic growth. While mild inflation of around zero to five percent still has a demand-stimulating effect as consumers want to spend or invest their money, with severe inflation of more than five percent money loses its value faster than goods. Real wages fall. The biggest losers in inflation are holders of financial assets and fixed-income securities such as government or corporate bonds, as these are devalued. The state, on the other hand, can partially benefit from inflation by significantly reducing the real value of its debt.
What is “perceived inflation”?
With the introduction of the European common currency, the euro, in some euro countries there was a clear difference between the inflation rates perceived by the population according to surveys and the statistically collected values. The so-called “perceived inflation” was significantly higher than the official inflation rate. The perceived inflation of the population came about through price increases on everyday expenses such as food and heating costs, in contrast to automobiles or computers.
What is deflation?
Deflation is the opposite of inflation. Deflation, for example, is a general fall in the prices of goods and services, as opposed to the depreciation of money in the case of inflation. In deflation, the value of money increases because more goods can be bought.
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