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BUSINESS

Business confidence buoyant for 2010

German business confidence is climbing, with companies more optimistic about the economy than they were at the end of last year, a poll released Wednesday has found.

Business confidence buoyant for 2010
Photo: DPA

The survey of 25,000 companies, conducted by the German Chambers of Industry and Commerce (DIHK), found that in the 10 most important sectors, firms are clearly confident that 2010 will be better for business than last year.

The report found that confidence in an upswing in exports was largely responsible for the buoyant mood, according to daily Bild. The DIHK was set to release the full survey Wednesday morning.

But firms also warned of dangers threatening the rebound: rising energy prices, high wage bills and a lingering difficulty with obtaining credit.

Especially positive were the chemical industry, which employs 331,000 workers and the electrical industry, which employs 800,000, with 45 percent of companies improving their prognosis in the new year.

Research and develop businesses and the IT sector were also more optimistic. In the latter, some 38 percent of firms predicted an upswing in business compared with just 14 percent who believed it would go backwards.

One cloud on the horizon was a lack of qualified engineers.

The least confident of the 10 major sectors were the mechanical engineering sector – a key industry that includes machinery manufacturers and employs about 1 million workers – and the health and social services sector, which employs 3.3 million.

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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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