German economy in freefall as locals face devastating price hikes – inflation explodes

Suppliers across the nation are preparing to increase their prices. According to a survey by the IFO Institute in January, price expectations for the next quarter rose by 46 points.

Worryingly for German economists and consumers, the results of the survey point to a new high in inflation.

Timo Wollmershäuser, the head of IFO economic forecasts, said: “Companies are passing on the increased costs for energy and for the procurement of primary products and merchandise to their customers.

“This will impact consumer prices.”

Mr Wollmerhäuser added: “Monthly inflation rates will therefore remain above four percent for a while.

“We have therefore raised our inflation forecast for 2022 to four percent.

“In December, we still expected the cost of living to rise by 3.3 percent.”

The very high survey values come from all sectors of the economy.

They were particularly high in wholesale with 60.3 points, followed by retail (57.7) and industry (55.6).

The service providers reached a new high with 41.9. Construction was at 41.5.

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The situation does not appear to be the case elsewhere in Europe.

New data revealed last week shows France’s economy grew in 2021 at the fastest speed in over 52 years.

The French economy is now at its pre-pandemic levels.

Gross Domestic Product grew by 0.7 percent in the last quarter of the year, according to France’s national statistics institute.

Analysts had calculated a 0.5 percent GDP jump by seven percent in 2021 after an eight percent pandemic-induced decline in 2020.

Spain grew at an even faster pace in the last quarter of 2021, with GDP up two percent over the previous three months, according to official data.

Economists polled by Reuters had expected 1.4 percent.

The economy, however, hasn’t yet made up for the ground lost during the pandemic, due to the size of the tourism industry, one of the worst affected in the past two years by lockdowns and travel restrictions.

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For Germany, one of the largest impacts on its economy has been in the automotive industry.

Registrations of new passenger cars in the EU slid by 2.4 percent in 2021, to 9.7 million vehicles, the worst performance since statistics began in 1990, according to data from the European Automobile Manufacturers Association (ACEA).

That follows the historic fall of nearly 24 percent suffered in 2020 due to pandemic restrictions. New car registrations in the EU were 3.3 million below the pre-crisis sales of 2019.

The lack of semiconductors, the computer chips used in a multitude of car systems in both traditional and electric vehicles, was the main reason holding the industry back.

An ACEA spokesperson said: “This fall was the result of the semiconductor shortage that negatively impacted car production throughout the year, but especially during the second half of 2021.”

Germany is by far Europe’s largest car market, accounting for a quarter of total sales at over 2.6 million last year.

If the shortage of semiconductors was the major factor holding back a rebound, the EU also underperformed compared to the other major markets where the recovery from the pandemic was stronger.

Additional reporting by Monika Pallenberg