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EUROPEAN UNION

Industrial orders plunge 6.1 percent in October

German industrial orders fell by 6.1 percent in October on a 12-month basis, and were 9.5 percent lower from the level the previous month, the Economy Ministry said on Friday as the biggest European economy remained mired in recession.

Industrial orders plunge 6.1 percent in October
Photo: DPA

Analysts polled by Dow Jones Newswires had anticipated a slight yearly increase of 0.4 percent. All major German industrial groups reported fewer orders than in the previous month, a ministry statement said.

Domestic as well as foreign orders fell in October, it said, the the annual

decrease was slightly better than September’s rate of 8.3 percent, which came

as Germany officially entered recession with two consecutive quarters of

economic contraction.

The latest figures suggested that any rebound was months away, and came as

the German central bank forecast that economic activity would contract by a

further 0.8 percent in 2009. In 2010, the Bundesbank expected the economy to expand by 1.2 percent.

Germany, still the world’s leading exporter, has been hit in particular by slumping demand in eurozone partner countries, the economy ministry said.

Its data confirmed information published recently by Germany companies, notably auto manufacturers, chemical groups, and makers of machine tools. The machine tool federation VDMA announced this week an annualised 16 percent drop in October orders.

The trend is nowhere near an end moreover, the car maker BMW saw its sales fall by 25 percent in November and heavy truck maker MAN has said it expects sales to plunge by 30 percent next year.

With orders still in a tailspin, “industrial production will continue to fall in the months to come,” the Economy Ministry forecast.

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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