German companies expect mild recession as disruptions ease

By: News Team

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German companies expect mild recession as disruptions ease

German companies expect only a mild recession next year, despite headwinds from the energy crisis, shortages of raw materials and a moderately dynamic global economy, a survey of major associations published by Reuters showed on Tuesday.

“The last quarter of 2022 and the beginning of 2023 are likely to be accompanied by a decline in economic activity,” said Siegfried Russwurm, president of the Federation of German Industries (BDI). “However, we expect only a slight drop.”

There are growing signs that the German economy could avoid the worst of an economic recession triggered by plummeting energy supplies from Russia following the invasion of Ukraine.

Inflation fell slightly to 11.3% in November, from 11.6% the previous month, due to lower energy prices. The German government has forecast that the economy will grow by 1.4% this year and contract by 0.4% next year.

Russwurm warned that growth would remain subdued until 2024 as weak demand around the world weighs on Germany’s export-dependent economy.

The Association of German Chambers of Industry and Commerce (DIHK) said there were many indications that supply chain disruptions were gradually abating.

“Container freight rates are back close to long-term normals, and congestion outside international ports is slowly decreasing,” said Peter Adrian, president of DIHK.

“If the announced relaxations of China’s ‘zero COVID’ strategy are implemented, it would also be a positive sign for global supply chains,” he added.

However, the DIHK warned that rising energy prices and weakening consumer confidence continued to cloud the outlook for 2023.

The artisans’ association ZDH issued a message similar to that of the DIHK, stating that far fewer orders will arrive next year.

“The order book will sustain us until early spring, but there are many questions for later,” said Holger Schwannecke, secretary general of the ZDH.

The German Association for Wholesale, Foreign and Service Trade (BGA) said the situation remains strong in many sectors of the economy. “But we dragged negative expectations from month to month, the depth and breadth of which have not yet been realized,” said BGA President Dirk Jandura.

He was confident that companies will return to a more encouraging path throughout the spring.

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