The rise in prices of goods and services due to the war in the Middle East is hitting lower-income households in Germany much harder than wealthier ones, according to a new study by the German economic institute “Ifo“ (Ifo), BTA reported.
“We see that poorer households are less able to withstand price shocks and suffer greater losses in purchasing power“, says researcher Tiffin Wibo.
According to the analysis, the crisis in the Middle East increases consumer spending by German households by a total of around 16.8 billion euros.
The hardest hit are households in the lowest income decile, who lose an average of 2.87 percent of their disposable income. By comparison, the loss for households with the highest incomes is 0.65 percent, and on average for all households – 1.15 percent.
“Since there is no European price cap for this shock, as there was during the energy crisis in 2022, the burden falls almost entirely on households, especially those with low incomes“, points out “Ifo“ researcher Andreas Peihl.
The study shows that older people are also among the most affected. Retired couples lose an average of 1.53 percent of their income due to the price shock, and single pensioners - 1.45 percent.
According to the authors, the reason is that pensioners cannot rely on income from work, and spend a larger than average share of their budget on heating and energy.
In their analysis, the economists from “Ifo“ compare forecasts for the German economy before and after the outbreak of the war in the Middle East and calculate the impact on the purchasing power of different types of households.
The researchers note that the estimates presented should be seen as an upper limit of possible losses, since households usually adapt their consumption behavior when prices rise sharply.