Inflation is no longer a pressing issue for the general population. The situation is somewhat different for businesses. The shock of the abrupt price increases in 2021/2022 is still fresh in the minds of board members and managing directors. Next year could see a new round of price increases. However, the starting point has changed compared to the coronavirus period. Corporate leaders do not want to be caught off guard again.

The problem is that there is no consensus on how the inflation rate will develop in the medium term now that the situation has eased. Customs policy is becoming an unpredictable factor. Prices should actually rise if the US is able to implement its plans. On the other hand, from a European perspective, the exchange rate against the dollar also plays a role, and prices for fossil fuels are falling as the economy grows.

Meanwhile, the European Central Bank is trying to manage inflation expectations. The goal is to reassure citizens that the central bankers will reliably bring the rate back down to around 2%. For companies, however, simply trusting this target is not an option.

Managers must take relevant inflation into account in their budget planning for 2026, including on the sales side. Many executives have recently experienced a disaster. Companies cannot immediately pass on customs costs to customers, which threatens to reduce profits in 2025. In some cases, companies have had to set aside billions in provisions.

This triggers a psychological factor that inflation models do not take into account. Companies will tend to raise prices more aggressively out of caution. Of course, this has its limits when market share is at risk. But competition is easing in many industries as countries such as Germany venture into very high levels of debt for spending programmes. When the US finally adopts its budget plan, the „big beautiful bill“ will lead to a demand bonanza there, but also to a large, unwelcome jump in inflation. This risk is underestimated.

The market situation has changed compared to the 2010s. Back then, customers reacted allergically to higher prices. The logic was that everyone had to compensate for rising manufacturing costs through improved productivity. However, since 2022/2023 saw the highest inflation rates of the century, moderate price increases have become socially acceptable again.

This acceptance is not only found among private customers, but also among large companies. The example of Krones illustrates this. The machine manufacturer supplies beverage filling and packaging systems to the oligopolistic beer brewing and soft drink manufacturing industry. In 2018, the management struggled, sometimes unsuccessfully, to implement the first price increase in five years. Now, such large-scale rounds no longer exist. The machine manufacturer has turned the increases into a continuous process. Customers are accepting it.

Another new development is that the supply contracts of most companies stipulate that cost increases are passed on. Gone are the days when wind turbine manufacturers, for example, were left sitting on rapidly rising costs for steel and other materials. In addition, some corporations are relatively relaxed when it comes to tariffs. Siemens, for example, says it does not want to fuel inflationary tendencies, but it could pull the appropriate levers – in other words, raise prices. Just how well this works is demonstrated by property insurers everywhere, which are now achieving excellent profitability figures beyond car insurance.

Corporations are therefore well prepared for the next surge in inflation. Companies that have their supply chains under control and, as market leaders, have pricing power will become even more profitable. However, their higher sales prices could fuel inflation even more.