German economy already in recession

The energy crisis, high inflation and the cooling global economy are fierce headwinds for the German economy. Germany is in recession and unfortunately there is no light at the end of the tunnel at the moment. The war in Ukraine instigated by the Russian president is likely to lead to growth losses of at least five percent of gross domestic product in 2022 and 2023.

The enormous increases in energy prices are leading to dramatic losses in purchasing power and threaten to make production unprofitable in many companies. The gloomy global economy is also placing an increasing burden on export-oriented German industry. For example, the war in Ukraine is not only leading to an energy crisis and high inflation rates in most developed economies, but also to recessions or significantly lower growth rates. In addition, the Chinese economy is being held back by corona lockdowns and the smoldering real estate crisis.

In the wake of these developments, new orders for German industry are declining. There are increasing signs of a lull once the numerous existing orders have been processed. At least the previously stubborn bottlenecks in international supply chains appear to be gradually easing.

Services, too, are now in a downturn after an interim high in the spring. High inflation is dampening household spending, which is increasingly impacting sales in the retail and hospitality sectors, for example. At least, given the shortage of skilled workers, most people need not worry about job losses at the moment. However, high inflation means that many employees are facing wage losses when adjusted for inflation. People with low and medium incomes in particular are thus threatened with financial difficulties. Despite the relief packages adopted by the German government to date, many people and companies are looking to the future with great concern. These justified fears are additionally curbing the propensity to consume and invest and threaten to exacerbate the recession even further.

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