joachim nagel : return of inflation - what do we learn from survey data? speech by dr joachim nagel, president of the deutsche bundesbank, at the joint spring conference on monetary policy and expectations of households and firms, eltville am rhein, 23 june 2022. * * * 1 introduction ladies and gentlemen, dear colleagues, i am delighted to open the policy session of this year's joint spring conference. i would like to thank you for accepting our invitation to come to eltville and present your work and share with us your thoughts on households'and firms'expectations and their relevance for monetary policy – the topic of this year's conference. this is already the second conference on households'and firms'survey expectations, co - hosted by the bundesbank and the banque de france. the previous joint conference on this topic took place almost three years ago. a short space of time under normal circumstances. but in light of the global events that have overwhelmed us during these past three years – the pandemic and russia's war on ukraine – it's almost like another era for many. the same can be said about economic developments. three years ago, the bundesbank presented some insights from a pilot survey on household expectations. the key results : inflation expectations in germany indicated no risks to price stability. at that time, risks to price stability mainly meant the risk of deflation. indeed, in those days, some economists even proclaimed the end of inflation. in may this year, inflation, as measured by the hicp, exceeded 5 % in france and 8 % in germany. the last time we had inflation rates of this magnitude in germany was in the winter of 1973 - 74 during the first oil crisis. if inflation were a living person, they might respond with the famous words of mark twain : " the reports of my death are greatly exaggerated. " the recent spike in inflation is being driven, for the most part, by the aftermath of the pandemic and the war in ukraine. but the future path of inflation also depends on the inflation expectations of economic agents. expectations affect various economic decisions : consumption, wage demands and property purchases by households, investment, pricing and wage setting by firms, and portfolio investment decisions by market participants. if high inflation leads to upward revisions in inflation expectations, this may give rise to second - round effects in terms of wages and prices, too. accordingly, in a setting of dynamic inflation and given the difficulties

- 80 - 70 - 60 - 50 - 40 reversed, di ( " excessive " - " insufficient " ), % points " insufficient " all industries all industries construction retailing accommodations, eating and drinking services fy 2005 = 100 construction retailing accommodations, eating and drinking services - 30 - 20 - 10 cy 05 06 07 08 09 10 11 12 13 14 15 16 17 18 note : figures for software investment for fiscal 2018 are based on plans in the december 2018 survey. source : bank of japan. fy 05 06 07 08 09 10 11 12 13 14 15 16 17 18 chart 9 ii. efforts toward improving productivity global economy potential growth rate of the u. s. economy ( estimates ) growth rate of the global economy imf's outlook ( as of october 2018 ) y / y % chg. 3. 8 2. 2 3. 7 y / y % chg. 3. 7 3. 7 as of august 2018 2. 0 as of june 2017 3. 6 1. 8 3. 5 1. 6 3. 4 1. 4 3. 3 1. 2 3. 2 1. 0 3. 1 3. 0 cy 12 0. 8 cy 10 sources : imf ; cbo. chart 10 ii. efforts toward improving productivity changes in corporate profits profitability profits and sales s. a., % tril. yen ratio of current profits to sales tril. yen 1, 450 current profits ( left scale ) ratio of operating profits to sales sales ( right scale ) 1, 400 1, 350 1, 300 cy 00 cy 12 1, 250 notes : 1. based on the financial statements statistics of corporations by industry, quarterly. excluding " finance and insurance. " figures from 2009 / q2 exclude " pure holding companies. " notes : 2. shaded areas in the left chart indicate recession periods. notes : 3. figures for 2018 in the right chart are q1 - q3 averages on a seasonally adjusted annualized basis ( boj staff estimates ). source : ministry of finance. chart 11 ii. efforts toward improving productivity international comparison of labor productivity growth rate of labor productivity 1. 4 ann., y / y % chg. ( cy 2010 - 2017 average ) 1. 2 level of labor productivity cy 2017, u. s. = 100 1. 0 0. 8 0. 6 0. 4 0. 2 0. 0 note : the charts are based on ppp - adjusted real labor productivity per hour.