A liter of beer has never been more expensive at Munich’s Oktoberfest. But that didn’t stop the crowd willing to shell out €14.40. Dimension Pilsener provides key clues about consumer confidence in Europe’s largest economy.
Jörg Biebernick, chief executive of Paulaner, one of Germany’s largest breweries, learned the hard way just how big Oktoberfest is this year. He recently tried to get a table for a group of friends one evening and was told he had no chance. „All the tents are fully booked,” he said. „This is despite inflation.”
Biebernick was speaking at the Balaner tent at Munich’s Theresienwiese fairgrounds, which serves thousands of liters of beer daily to people dressed in lederhosen and dirndls. By noon the tables were already full and the ompa bands were in full swing.
But „things really explode around 8:30 p.m.,” Biebernick said. „It’s the bomb.”
For more than a year, Germany has been mired in economic recession, precipitated by a brutal surge in energy costs that has crippled the country’s tentative post-pandemic recovery.
And the outlook remains bleak. A joint forecast by the country’s leading economic think tanks on Thursday predicted a 0.6 percent contraction in gross domestic product this year. In the spring, they said, it would actually grow by 0.3 percent.
Oliver Holdemoller of the Halle Institute for Economic Research said German industry and private consumption were recovering „slower than we expected in the spring”.
Stubbornly high inflation is hurting ordinary citizens, rising interest rates have crippled the construction industry and uncertainty caused by the government’s erratic energy policies is weighing on the mood in German boardrooms.
But there was a ray of light: German purchasing power is growing, think tanks say. Energy prices have fallen from their 2022 highs and export prices have risen strongly, showing that companies are succeeding in passing on price increases to their international customers.
However, the most important factor is wage growth. Incomes will generally increase, thanks to the basic jobseeker’s allowance introduced by the government late last year and a boost to pensions planned for 2024.
„Wages and transfer income will rise significantly in the second half of 2023, and then will be even stronger next year,” said Stephen Kooths, director of the Kiel Institute for the Global Economy.
„That means more purchasing power will flow to private households and this will boost consumption-related sectors of the economy.”
The numbers, released in August, showed German wages rose at a record annual pace of 6.6 percent in the second quarter, the highest rate of increase since such records began in 2008.
This pushed Germany’s annual wage growth above the country’s consumer price inflation rate for the first time since 2021. Household income finally seemed to catch up with the cost of living.
„Private consumption has been very weak and this has caused real problems in the past, especially at the beginning of the year,” Kooths said. „But that’s changing now.”
Inflationary pressures are also easing, with the annual rate falling to 4.3 percent in September, a two-year low. It was 6.4 percent in August.
This year’s Oktoberfest offers evidence of a brighter mood. In half of that, about 3.4 million people participated Meadows100,000 more than in 2019, with guests spending €1.25 billion on its drinks, food and fairground rides. The Meadows It drew 1 million viewers in its first weekend, up from just 700,000 last year.
As opposed to 2022. „Last year was the worst weather in my experience,” said Andreas Steinfatt, head of sales, marketing and regional brands at Paulaner. „It rained 14.5 days out of 17, and the temperature didn’t rise above 12 degrees. You had to wear a scarf.”
Munich is experiencing an Indian summer this year, with the sun shining almost every day. Yet the outlook isn’t entirely bearish – prices are at historic highs.
„Everything is going to be expensive this year,” Biebernick said. A liter of beer costs between €12.60 and €14.90, 6.1 percent higher than last year. A plate of pork, a traditional Oktoberfest dish, costs €25, up from €20 in 2019.
Brewers said they had no choice but to bear higher input costs. „Malt and hop prices have doubled in the last two years,” said Paulaner’s master brewer Christian Danke. Sugar is expensive, as is aluminum for cans.
But no one seemed concerned about the extra cost, said Bipernik, who expects to drink 7 million liters of beer during the 18-day festival.
„I don’t think people are deterred by high prices,” he said. „Purchasing power in Munich is, however, the highest in Germany, if not in Europe.”