Delivery bottlenecks and war: Bundesbank: Economy still under pressure

Delivery bottlenecks and war: Bundesbank: Economy still under pressure

The Bundesbank does not yet see any recovery in the German economy. High energy and material costs are also driving up consumer prices.

According to estimates by the Bundesbank, the German economy will “grow at best slightly” in the current second quarter.

“On the one hand, the easing of the corona protection measures should give the service sectors and the associated consumer spending a strong boost,” says the Bundesbank’s monthly report for May. “On the other hand, the effects of Russia’s attack on Ukraine are increasing the burden of high inflation and supply shortages.”

Survey: Companies fear further losses

According to a Bundesbank survey of more than 500 companies, the industry expects production losses to increase in the second quarter of 2022 as a result of the Ukraine war. Some manufacturers fear “noticeable production losses due to supply bottlenecks” up until 2024.

High energy and material costs and increased uncertainty are currently weighing on production in industry and construction. High inflation is also slowing down private consumption. In April 2022, consumer prices in Germany were 7.4 percent higher than in the same month last year. The rate of inflation thus reached its highest level since reunification in 1990. A similarly high value was measured in the old federal states in autumn 1981.

Inflation rate averages around seven percent

“In view of persistently high prices for raw materials, transport services and other primary products, consumer prices are likely to rise sharply in the coming months,” predicts the Bundesbank. “Against the background of strong inflation at the upstream stages, the average inflation rate for the current year should be around 7 percent from today’s perspective.”

Source: Stern

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