SHARE
COPY LINK

ECONOMY

German recession could be less severe than expected, survey shows

German business confidence improved in November, a key survey said Thursday, as hopes grow that a looming recession in Europe's top economy will be less severe than feared.

An employee at a shop handles cash. Germany is facing tough times economically, according to experts.
An employee at a shop handles cash. Germany is facing tough times economically, according to experts. Photo: picture alliance/dpa | Fabian Sommer

The Ifo institute’s monthly confidence barometer, based on a survey of about 9,000 companies, reached 86.3 points, rising for a second month after a revised 84.5 points in October.

Before October, the reading had fallen for four months straight.

“Sentiment in the German economy has improved,” Ifo president Clemens Fuest said in a statement.

“Pessimism regarding the coming months reduced sharply. The recession could prove less severe than many had expected.” 

READ ALSO: Has Germany’s sky-high inflation finally peaked?

Germany is facing soaring inflation – consumer price rises hit 10.4 percent in October – driven by high energy costs after Russia slashed gas supplies following its invasion of Ukraine.

The government has forecast that Europe’s economic powerhouse will contract 0.4 percent in 2023, with inflation set to remain stubbornly high.

But hopes are growing that government relief measures – including a €200 billion package to shield companies and citizens from inflation – will soon bring prices down.

Germany’s gas storage facilities were completely filled up earlier this month, easing fears of winter shortages.

Carsten Brzeski of ING bank said the Ifo survey “adds to recent glimmers of hope that the German economy might avoid a winter recession.”

But he added the government stimulus “will come too late to prevent the economy from contracting in the fourth quarter.

“However, it is substantial enough to cushion the contraction and to turn a severe winter recession into a shallow one.”

Other surveys have started to show signs of improvement.

Earlier this month, a ZEW institute survey showed an increase in investor confidence for the second consecutive month.

Member comments

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

ECONOMY

‘Very small breather’: German inflation unexpectedly slows down

German inflation unexpectedly slowed in November after months of increases, preliminary data showed Tuesday, as sky-high energy prices begin to ease.

'Very small breather': German inflation unexpectedly slows down

The inflation rate in Europe’s top economy fell back to 10 percent this month, federal statistics agency Destatis said, after hitting a record high of 10.4 percent in October.

Analysts surveyed by Factset had expected an acceleration of 10.5 percent in November.

The surprise dip comes as “energy prices have eased slightly”, Destatis said, although it noted they were still 38.4 percent higher than a year earlier.

As in other countries across Europe, Germany’s recent consumer price hikes have been fuelled by soaring food and energy costs in the wake of Russia’s war in Ukraine.

READ ALSO: EXPLAINED: 10 ways to save money on your groceries in Germany

The German government has unveiled a €200 billion energy fund to shield households and businesses from price shocks, and has raced to diversify supplies after Russia cut gas deliveries.

Tuesday’s inflation data offered a “very small breather” for a country bracing for a difficult winter, said ING bank economist Carsten Brzeski.

But he cautioned it was too soon to hope inflation was on a downhill path.

“The pass-through of higher wholesale gas prices is still in full swing. Many households will see the first price increase only as of January 1st,” he said.

READ ALSO: How energy prices are rising across Germany

European Central Bank President Christine Lagarde echoed that sentiment Monday, when she said the eurozone had not yet reached peak inflation.

Like other central banks around the world the ECB has moved aggressively to curb red-hot inflation, lifting its key interest rates by two percentage points since July.

Lagarde has repeatedly said the bank would continue to raise rates in its battle to bring inflation back to its two-percent target.
The next rate hike is expected at the ECB’s upcoming December 15th meeting.

READ ALSO: Has Germany’s sky high inflation finally peaked?

SHOW COMMENTS