“Prospects for future developments (of the economy) are currently remarkably gloomy,” the Ministry noted in its August monthly report, adding that they were marked by “a high degree of uncertainty”.
The price of energy, the trigger
Producer prices, seen as a leading indicator of inflation, were mainly driven by high energy priceswhich as a whole were up 105% from the same month last year, the federal statistics office said on Friday.
“Significantly lower gas supplies from Russiapersistent price increases for energy and, increasingly, for other goods, as well as longer-than-expected supply chain disruptions, also related to politics China of ‘zero contagion’, are weighing heavily on the development of the economy,” he added.
The German economy had stagnated in the second quarter, when the war in ukrainerising energy prices, the pandemic, and supply chain disruptions have pushed it to the brink of recession.
From October 1, Germany will impose encumbrances to gas consumers who will add several hundred euros to the annual energy bill from an average family. To cushion the impact, taxes on gas sales will be reduced from 19% to 7% while the levies are in place.
Uncapped inflation in Germany
Rising energy prices mean that inflation shows no signs of calming down anytime soon: Germany’s annual inflation in July was 8.5%, in line with the record rate in the Euro zone 8.9%.
Experts forecast that German inflation could be around 9% after the expiration at the end of August of the relief measureswhich include cheaper public transport and reduced fuel tax.
According to Ralph Solveen, an economist at Commerzbank, inflation is likely to peak. However, wage increases forecasts for next year will continue to drive the rise, “and companies are likely to pass on these costs to their customers.”
In April, the German government forecast inflation for 2022 of 6.1%. On October 12, it will present updated economic projections, according to the Ministry of Finance.
Source: Ambito
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