According to a new study, there is a significant discrepancy between how many Germans perceive their financial situation and how much money they actually have available for spending. There is a "considerable discrepancy between the perceived and measured development of disposable real incomes," the Institute for Macroeconomics and Business Cycle Research (IMK) at the Hans Böckler Foundation announced on Wednesday.
Although losses caused by inflation had, on average, already been offset again by 2024, a majority of people still "feel worse off."
For the study, the research institute of the union-affiliated foundation analyzed the development of inflation and disposable incomes, and also carried out a large-scale survey. According to the IMK, this showed that while the coronavirus crisis and the war in Ukraine fueled consumer price inflation between 2021 and 2023, these losses were subsequently offset again by collective pay increases, a higher minimum wage, pension increases and easing inflation, "at least on average across the economy as a whole."
By contrast, the population perceives the situation "far more negatively," the institute explained. "Almost 60 percent of people still considered their own purchasing power to be lower at the end of 2025 than it was before the inflation shock," the research institute stated.
The consequences of this include "concerns about the future development of the cost of living," but also reluctance to spend, consumption being regarded as an important pillar of economic development in Germany, as well as "distrust of the federal government."
For the study, around 7,000 people between the ages of 18 and 75 were surveyed last November, before the start of the Iran war. Only eleven percent said they could afford more than they could five years ago, while 30 percent perceived their purchasing power as unchanged. In contrast, 59 percent were convinced that they had less money available in real terms.
One reason for this, according to the IMK researchers, could be that everyday essentials in particular have become more expensive. Since 2020, the price of household energy has risen by 47 percent and the price of food by more than 30 percent. Indeed, 47 percent of respondents said the higher cost of household energy represented a "severe burden," while for food the figure was 44 percent. "
The fact that prices for many less frequently purchased goods have risen only moderately is evidently far less noticeable," the researchers explained.
The perception of reduced purchasing power also has an impact on the political mood. Among respondents who felt their purchasing power had declined, almost 80 percent were dissatisfied with the federal government's performance, and 35 percent had no confidence whatsoever in the institution. Within this group, 55 percent also expressed "great concern" about future living costs. Study authors Jan Behringer and Lukas Endres pointed out that fear of rising prices can prompt households to cut back on consumer spending in order to preserve financial flexibility.
The results, the IMK said, offer a possible explanation for why private consumption remains weak "despite restored real incomes." They also show how important early and targeted measures to curb sharp price increases are, "particularly for everyday essentials, which are especially relevant to how people perceive their own purchasing power," the institute explained. This currently applies, for example, to fuel prices, which have risen significantly as a result of the war with Iran.
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