By Michael Nienaber

BERLIN (Reuters), German consumers are facing higher prices across all products as more businesses in Europe’s biggest economy choose to increase production costs. This is due to widespread shortages of supply and a rise in energy prices.

The development helps firms improve their corporate margins following the coronavirus-related shock. However, the price hikes are affecting consumers’ spending habits and could lead to lower household incomes.

The Ifo Institute in Munich reported Monday that the second largest industrial group in Germany has already indicated plans to increase prices to address persistent supply problems. It is a new record.

The consumer price inflation was harmonised so that it is comparable to other euro-zone countries. It accelerated by 4.1% in September. Further data are due on Thursday.

In 2021, the government projects that the nation’s inflation rate will be 3%. That is nearly three times the level of the previous 30 years. Then, it will fall to 2.2%-2022, and then to 1.7%-2023.

State aid is being used to mitigate the consequences of pandemic. The government expects that disposable income for consumers will increase by 2.5% next year and 3.8% the following year. This should help stabilize domestic demand, despite the recent price rise.

However, many consumers are feeling the effects of the extraordinaryly high inflation. There is growing doubt that this temporary increase in prices will be as significant as the central bankers suggest.

Radeberger Group is Germany’s most important brewery and plans to increase its beer prices in spring next year. This will be done for the retail and hospitality industries as well as the increasing costs of logistics, utilities and raw materials.

Radeberger spokesperson stated that these cost increases cannot be compensated by simply increasing efficiency.

According to the spokesperson, “We feel obliged to pass these cost explosions on with a feeling of proportion, at most in part, in terms of our sales prices.”

From February 1st, hotels, restaurants, and bars will pay more beer, while retail outlets and supermarkets may see an increase in price starting May 1st.

Radeberger spokeswoman declined to respond to an article in the food industry magazine Lebenmittel Zeitung that claimed Radeberger was expecting a price rise of as much as 6%.

Krombacher, Veltins and other large breweries have announced that they will increase their beer prices for spring.

The automotive industry is experiencing a shortage of microchips.

When presenting Wednesday’s government’s lower growth outlook, Economy Minister Peter Altmaier stated that the shortage of semiconductors means that car makers cannot currently build hundreds of thousand of vehicles.

Due to limited production and scarce supplies, manufacturers must make less price concessions when selling new models or reselling lease vehicles.

Analysts from Stifel Research stated in a research paper that Mercedes and BMW are making up a significant portion of lost volumes by offering better products and more affordable prices.

According to a BMW spokesperson, the leasing market has developed in a better way over the past year than was initially anticipated.

Nivea, Jungheinrich forklift manufacturer and HeidelbergCement construction material specialist are just a few of the other German businesses that plan on passing higher energy and raw materials costs onto their customers.

Puma, the German sportswear manufacturer, said Wednesday that rising raw material costs could cause supply chain problems, which in turn may lead to higher prices in 2022’s second half.

Bourn Gulden, chief executive of Puma, warned that in the near term supply chain issues could cause empty shelves before Christmas. I told my wife, “If you really want Christmas presents to be bought now,”