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 the catering industry has seen a slowdown in price increases, they remain above average. According to Josef Baumgartner from the Wifo economic research institute, it is wages in labor-intensive sectors like catering and hotels that are driving up service prices the most due to wage increases. Baumgartner predicts that passing on wage increases to service prices will be the primary driver of inflation in the coming years.
Austria’s decoupling of wage development began in 2023, with Baumgartner noting a backward-looking wage formation aimed at compensating for earlier purchasing power losses. Real wages saw significant decreases 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.
Small and medium-sized businesses in Austria are still facing high energy prices challenges. Suppliers have made provisions for price bottlenecks since 2022, and Economics Minister Martin Kocher and Finance Minister Magnus Brunner are pleased with the decline in inflation and attribute it to measures taken to control inflation’s impact on the country’s economy.
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