The Ifo Institute has lowered its economic forecast for the current year and now expects gross domestic product to fall by 0.4 percent. At 5.8 percent, inflation is likely to be lower than in the previous year, but private consumption should not noticeably increase economic output again until the fourth quarter. “The German economy is only slowly working its way out of the recession,” said Ifo economic chief Timo Wollmershäuser on Wednesday in Berlin.
With a decline in economic output of 0.9 percent in the past two quarters, “we are clearly at the bottom” – all important trading partners are doing better. One reason is the relatively high proportion of energy-intensive industry in this country. Real household incomes and purchasing power have fallen. Unlike the Americans, the Germans left their savings from the Corona years on the high edge and saved when buying goods.
In the current quarter and the coming quarter, the economic researchers expect only very weak economic growth of 0.1 and 0.2 percent. From the summer, however, “incomes are likely to increase faster than prices and private consumption should pick up speed”. The service providers are already doing well. The industry still has high order backlogs and could “then expand much more strongly again as the supply bottlenecks gradually come to an end,” the Ifo experts expect. On the other hand, the construction industry will continue to shrink this year and next. Building prices continued to rise, and interest rates on loans remained high.
The recession is also having a negative impact on the labor market: “The increase in employment is likely to weaken noticeably in the coming months.” The Ifo Institute expects the number of unemployed to rise from 2.42 million last year to 2.55 million this year.
Next year, the Munich economic researchers expect economic growth of 1.5 percent and a normalization of the inflation rate to 2.1 percent. A wage-price spiral is not in sight because many one-off payments have been agreed in the collective bargaining rounds. The burden of the energy price shock is distributed relatively fairly, because even the sales and profit increases of many companies “not much is left after inflation,” said Wollmershäuser.
The energy transition initially costs Germany resources and does not bring any growth spurt. “We will only reap the fruits of the transformation at some point in the future,” said Wollmershäuser. The serious problem is the decline in skilled workers and workers in Germany: As a result, economic output will only grow very little in the medium and long term. (dpa)