The Director General of Statistics Austria, Tobias Thomas, has observed that the prices for food and fuel are currently contributing less to inflation compared to recent months. Although the price increases in the catering industry have slowed down, they are still above average. According to Josef Baumgartner from the Wifo economic research institute, prices for services, particularly in labor-intensive sectors like the catering and hotel industry, are rising at a faster rate due to wage increases. Baumgartner predicts that passing on wage increases to service prices will be the main driver of inflation in the coming years.
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 have higher wage costs affecting competitiveness.
High energy prices remain a challenge for small and medium-sized businesses in Austria, with suppliers having made provisions for price bottlenecks since 2022. Economics Minister Martin Kocher and Finance Minister Magnus Brunner are pleased with the decline in inflation and credit the measures taken to curb inflation for the positive results in Austria.
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