B Y N IC HOL A S T H E U E R K AU F ( W ’ 11)
GERMANY & OKTOBERFEST:
DEFLATION KEPT AT BAY
he world’s largest fair starts at exactly noon each year in midSeptember, when Munich’s mayor
taps the festival’s ﬁrst keg and declares, “O’ zapft is!” (“it’s tapped!”). The festivities will last the next 17 days and this year there is much to celebrate. Not only is it Oktoberfest’s bicentennial, but the German economy
fell to its lowest levels since Germany’s reuniﬁcation and exports are souring. The German economy grew at a spectacular annualized rate of 9% in the second quarter (more than other developed economies). Although
tradition, the festival has become big business. About six million people attend the fair each
“Drink up, Helmit! Have no fear. This mighty beer has been approved by the European Commission, regulation 4064/89, log 24, article 58...”
year. This year’s celebrations injected about one billion euros into Munich’s economy
year, while last year it sold for EUR 8.44. To
(nearly 2% of the city’s GDP) with beer
evaluate Oktoberfest’s impact on inﬂation
accounting for, by far, the greatest portion.
more broadly, UniCredit economists devised a
But, in today’s economic environment the
basket of goods and services called the Wiesn
primary beneﬁt of the fest may be to mitigate
Visitor Price Index, which includes the price
deﬂation. Germany’s economy-wide inﬂ ation
of public transportation and a half a grilled
rate of only one percent falls signiﬁ cantly
chicken (Hendl) in addition to two Masses. The
short of the European Central Bank’s target
index has increased by more than 4% per year
euro-zone inﬂ ation rate of just under 2%.
since the mid-1980s, double Germany’s annual
That’s why the nearly 2.5% price increase
inﬂation rate over the same period.
in one liter (or Mass) of beer since last year,
While the United States and Japan are
a strikingly greater value than the 0.3%
ﬁguring out new methods to keep deﬂation at
inﬂation rate for bottled beer, is signiﬁcant.
bay, Germany, it seems, will rely on the 200-
The average Mass sold for EUR 8.65 this
year old Oktoberfest for now. iBR
FA L L 2 0 1 0
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I N T E R N AT I O N A L B U S I N E S S R E V I E W
11/27/2010 3:13:13 PM
Fall edition of the IBR magazine at the Wharton School.