The Director General of Statistics Austria, Tobias Thomas, has observed that food and fuel prices are currently contributing less to inflation compared to previous months. While price increases in the catering industry have slowed down, they remain above average. According to Josef Baumgartner from the Wifo economic research institute, prices for services, particularly in labor-intensive sectors such as the catering and hotel industry, are increasing at a faster rate due to wage increases. Baumgartner predicts that the passing on of wage increases to service prices will be the main driver of inflation in the coming years.
Inflation has been a significant challenge for small and medium-sized businesses in Austria due to high energy prices. Suppliers have made provisions for price bottlenecks since 2022. Despite this challenge, Economics Minister Martin Kocher and Finance Minister Magnus Brunner are pleased with the decline in inflation and attribute it to measures taken to curb inflation.
The decoupling of wage development in Austria began in 2023, with Baumgartner noting a backward-looking wage formation to compensate for earlier purchasing power losses. Real wages saw significant losses in 2022 but have since increased, with expectations for further increases as inflation falls. Baumgartner believes that Austria will eventually catch up with other eurozone countries in wage increases but will continue to face higher wage costs affecting competitiveness.
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Overall, these trends highlight the importance of understanding economic challenges such as inflation, wage development, and energy costs while also considering advancements in technology and consumer behavior across different industries.
