Deutschland: Wirtschaft schrumpft im Sommerquartal

Konsum im Einzelhandel (Archiv)

Konsum im Einzelhandel (Archiv)

Foto: Fabian Bimmer / REUTERS

The economic crisis in Germany appears to be continuing. According to the monthly report published by the Bundesbank, „The economic performance is expected to shrink slightly in the third quarter of 2023.“ This would mean that the period of no growth for Europe’s largest economy would continue: at the end of 2022 and the beginning of 2023, the gross domestic product had already shrunk before stagnating in the spring. In August, the Bundesbank had estimated that the economy would largely stagnate in the summer.

The ongoing slump for the quarter running from July to September is attributed to the persistently weak private consumption. The Bundesbank stated that despite the slightly declining price increases, strong wage growth, and a favorable job market, households are still holding back on spending. Additionally, the industrial sector is recovering at a slower pace than initially anticipated, as the declining order intake and decreasing order backlog are increasingly impacting industrial production.

Inflationsrate bei 6,1 Prozent

The increased financing costs are also expected to contribute to the weak demand from domestic and foreign sources, according to the Bundesbank. The European Central Bank (ECB) raised its interest rate to a record level of 4.50 percent last week in its fight against inflation, making loans more expensive and thus slowing down the economy.

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The current inflation rate in Germany is 6.1 percent. According to the Bundesbank, it is expected to „decrease further over the course of the year“. One reason for this is the elimination of „base effects“ – due to the tank discount and 9-euro ticket that were in effect last year, expenses were higher in the summer of 2023. However, the significant declines in import, producer, and wholesale prices are also expected to gradually be passed on to consumers. „Nevertheless, given robust wage growth, the inflation rate is expected to remain significantly above two percent in the medium term,“ the Bundesbank predicts.