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ECONOMY

Celebration follows panic on Dax

The Dax, an index of the top 30 German companies, made a 5 percent gain on Thursday, as good earnings in the real economy, as well as gains in Asian and American markets helped calm the mass panic on the bourses.

“Because of the below average development at the beginning of the week, the Dax should clearly increase,” a trader told German business magazine, Manager Magazine. “The decline seems to have passed and everybody is relieved,” said another trader.

The Dow Jones made a historical leap on Thursday afternoon from minus 2.7 percent to plus 2.5 percent. Nokia’s historic 24 percent leap in net sales buoyed stocks in Helsinki up 13 percent on Thursday. This boost, seen as a positive sign for the telecom industry, helped raise equity values elsewhere.

Thanks to a recommendation from Goldman Sachs, Eon, the German energy company, saw an increase of 3.6 percent in its stock price. Deutsche Post stocks climbed 5.2 percent. Siemens’ stock increased 1.3 percent and Porsche stocks went up 6.5 percent after their sales surpassed analysts’ expectations. The TechDax, an index of technology companies in Germany, saw a gain of almost 5 percent. Software AG was a star with a win of 17.8 percent.

The DAX sank 7.1 percent to 6790 points on Monday, along with significant losses on other bourses. These losses have created heightened volatility this week, which has now largely stabilised.

ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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