After a weak first half of 2022, the German economy is likely to stagnate at best in the third quarter of this year. The energy crisis, with continuing high concerns about a gas shortage and even higher energy prices, is the dominant slowing factor for the German economy. Energy prices are not expected to fall rapidly, which will also slow the decline in inflation. The global economy is also being weighed down by high inflation and a rapidly tightening monetary policy, which is dampening Germany’s exports. In May, the German trade balance turned negative for the first time in a long time in the wake of weaker exports and skyrocketing import prices for energy. The German growth model of the past is currently reaching its limits. Strong export and economic growth cannot be expected in the near future.
German industry in particular is suffering from the war in Ukraine. It is receiving significantly fewer new orders, especially from abroad. The currently still high order backlog can only be processed slowly because the disruptions to global supply chains are only easing slowly and the shortage of intermediate products is still a major problem.
The recovery in services, which began after the easing of the Corona protection measures, is now gradually coming to a halt, partly because households’ propensity to spend is being noticeably reduced by high inflation. After a weak first half, the German economy is already starting the third quarter with a lot of headwind. In the current year, the German economy is likely to grow only slightly by 0.5 percent. In 2023, too, growth is only expected to be low at 1.1 percent. Inflation will remain high this year and, despite falling significantly in 2023, will still be well above the central bank’s target of 2 percent.
If you would like to support my blog posts and economic forecasts, you can subscribe for 5 US dollars per month (or the equivalent amount in your currency). You can unsubscribe at any time:
Or contact me at: firstname.lastname@example.org