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ECONOMY

Car sales plunge in November

German new-car registrations plunged by 18 percent in November and will fall further next year, the VDA auto manufacturer’s federation said on Wednesday, bringing bad news from a key sector to an economy already in recession.

For the entire year, the federation forecast sales of just under 3.1 million vehicles, and said it expected a slump to 2.9 million in 2009. That meant German new car sales would drop in 2008 to “the weakest level since reunification” of eastern and western Germany in 1990, the federation said. A total of 233,800 new cars were registered in November, the fourth month running of falling sales, a VDA statement said.

“Car markets have taken a downward flight, which hasn’t occurred before with this speed and impact,” it quoted VDA president Matthias Wissmann as saying. “That will also have consequences for workers,” he warned during a press conference in western Frankfurt.

In Germany, where the auto sector is the country’s leading employer and exporter, both production and exports would fall back markedly in 2009, the federation said. VDA estimates that one out of every seven jobs in the biggest European economy depends directly or indirectly on the auto sector, while the German car market is also the biggest on the continent.

In many other European countries as well, automobile manufacturers and parts makers have said they planned to scale back production and some have said that furloughs and layoffs of temporary workers were to be expected as well.

French new car registrations were down 14 percent in November in raw figures and 5.0 percent when adjusted for comparable working days.

Spain and Italy showed even more dramatic falls, at nearly 50 percent and 30 percent respectively.

Luxury car sales are among those sliding lower, with wealthy Russians buying fewer Bentleys, Ferraris and other high-end vehicles as the global financial crisis reins in spending, daily Kommersant reported on Wednesday.

In the United States, auto sales plunged by 37 percent in November, industry data showed on Tuesday as General Motors, Ford and Chrysler got set to appeal to lawmakers for a massive bailout package. Executives from the Big Three will testify before Congress on Thursday and Friday. “Every manufacturer is posting awful numbers,” said Mark LaNeve, GM vice president of North America vehicle sales, service and marketing, and the group planned to cut up to 31,500 more jobs in the United States.

In Tokyo, Toyota Motor Corp. said Tuesday it would cut management bonuses by 10 percent, excluding top executives, and further reduce domestic production to cope with the slump. Toyota also reported a 34 percent drop in November US auto sales.

And new car registrations fell by 30 percent in Brazil in November on an annual basis, the national car dealers’ federation Fenabrave said, after two years of fast-paced growth.

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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