SHARE
COPY LINK

BUSINESS

Harsh winter set to cost €3 billion

The brutal start to winter is set to cost Germany’s recovering economy billions of euros as industries such as construction and logistics slow down or even grind to a halt.

Harsh winter set to cost €3 billion
Photo: DPA

If this year is as bad as the last, the elements will prove costly to Europe’s manufacturing and export-driven giant, experts say.

Volcker Treier, chief economist at the Association of Chambers of Industry and Commerce, said that a tough winter would cost German industry about €3 billion.

“A winter like the one we experienced at the start of the year, leads to losses of up to 0.5 percentage points of quarterly growth,” he said.

The building industry has been hit hard by the cold because projects cannot be started on time owing to worse-than-expected snow and ice, slashing its December sales by half. The industry normally brings in €7 billion to €8 billion in sales during December, the sector’s main body the ZDB said.

“This year, it is €3 billion to €4 billion less,” the association’s spokeswoman, Ilona Klein, told news magazine Der Spiegel.

Work could barely take place outdoors, she said. Few contracts were made for the months of January to March when weather is also expected to make work difficult.

“In four out of 12 months, nothing happens – it wasn’t so acute in previous years.”

The logistics industry is also suffering, with trucks having to slow down or getting caught in lengthy traffic jams. In the industrial powerhouse state of North Rhine-Westphalia, trucks are banned from driving on the autobahn under a directive issued Monday.

The insurance industry, not surprisingly, is in for a hefty bill. Last winter’s snowstorm named “Daisy” cost auto-insurers about €230 million, according the German Insurance Association (GDV), Der Spiegel reported. Property insurance claims cost another €500 million.

While GDV spokeswoman Katrin Rüter said it was too early to guess the cost of this winter, but if the weather stayed nasty for as long as the last one, the bill would be similarly huge.

Local governments are also having to fork out. The German City and Municipal Association said last winter cost an additional €3.5 billion for services such as snow-clearing and repairing damage.

“If the winter is as long and hard this time – and it’s starting to look that way – that can easily get even worse,” said association head Gerd Landsberg.

The most expensive thing was not clearing snow and debris, but rather repairing damage to the roads caused by ice getting into cracks and expanding, creating massive fissures and potholes.

“The damage from last winter still hasn’t even been all repaired,” said Landsberg.

Municipalities were responsible for 450,000 kilometres of roads, he said.

Transport obviously has also been affected. Airline Lufthansa recommended people travel by train because of the weather, and announced that air tickets could be exchanged for train tickets. Deutsch Bahn, however, urged people to steer clear of rail travel if possible, on the grounds that they expected crushing congestion.

A spokesman for Deutsche Bahn said it could not yet be estimated what kind of financial damage the operator would suffer because of the harsh cold. However the operator has to deal with higher costs, investing for example in more de-icing programmes.

The German Airline Association likewise said it was too early to count the cost of the weather, though it would be damaging.

“It’s not nice, either for the airports or the airlines,” spokeswoman Carola Scheffler said.

DPA/The Local/dw

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.

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.

READ ALSO:

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.

SHOW COMMENTS