Germany’s economy is expected to recover in the coming months following an ongoing recession, with inflation dropping to 3% year-on-year in October, according to data published by the National Statistics Office on Monday.
In the third quarter of 2023, the economy shrank by 0.1% compared to the previous quarter. However, experts predict that it will soon start to recover.
“The German economy bottomed out in the summer, and starting in the fall, things should slowly start picking up again,” Timo Wollmershäuser, head of economic forecasting at the Ifo Institute, said in a statement.
His comments are based on a survey of businesses carried out by the Institute, which showed a more positive sentiment than in previous months.
“The outlook for the coming months in particular has brightened, but companies are also assessing their current situation as somewhat better,” Wollmershäuser said.
Meanwhile, inflation, as measured by the European Central Bank’s harmonised index of consumer prices, fell to 3% year-on-year in October and is expected to continue to fall, especially as prices such as energy, which have already been hit hard by the war in Ukraine, are expected to fall further. However, so-called core inflation, which strips out volatile energy and food prices, remains higher at 4.3% in October.
Crucially, as export-oriented industries have been able to pass on higher production costs to customers abroad, wages can grow faster than prices, boosting private consumption, says the Ifo Institute.
Business representatives, however, are more cautious, with Martin Wansleben of the German Chamber for Industry and Commerce (DIHK) saying that “there are no foreseeable signs of a self-sustaining recovery.”
“The frustration in the companies is great. There are always new regulations for the companies. Ultimately, these are at the expense of productivity,” Wansleben said.
“In addition, the price of electricity is almost three times as high as it was in 2020,” he added, urging the government to slash taxes and levies on electricity.
(Jonathan Packroff | Euractiv.de)
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