German firms warn of rising inflation as energy and production costs soar
German businesses are bracing for higher inflation as energy and production costs continue to climb. The Ifo price indicator surged to 25.3 points in March, up from 20.3 in February, signalling growing pressure on companies across multiple sectors. Economists warn that rising expenses will likely push consumer prices higher in the coming months. The latest jump in price expectations follows months of elevated energy costs tied to geopolitical tensions. Since Russia halted gas supplies via Nord Stream 1 in August 2022, German firms have faced steep increases, compounded by a new gas storage levy of 2.99 euros per megawatt-hour starting January 2025. The ongoing conflict in the Near East, now in its second month as of March 2026, has kept oil prices high, further squeezing energy-intensive industries like Volkswagen and BASF.
Industry saw one of the sharpest rises, with the price indicator leaping from 13 to 20 points. Construction firms also reported a steep increase, doubling from 10 to 20.2 points. Meanwhile, consumer-related services raised their price expectations significantly, climbing from 25.1 to 31.6 points. Business services, including wholesale, followed suit, with the indicator rising from 24.7 to 27 points.
Klaus Wohlrabe, head of the Ifo surveys, noted that companies are now passing these costs on to customers. He also warned that sustained high energy pricesâdriven by crude oil, gas, and electricityâwill likely fuel broader inflation in the near term. The latest Ifo data confirms that price pressures are building across Germany's economy. With businesses planning more frequent price hikes, consumers and industries alike face a period of heightened costs. The trend reflects both lingering effects from the Ukraine war and fresh disruptions from the Middle East conflict.
