German economy crisis warning as inflation climbs to 6% | City & Business | Finance

Snapshot figures released today revealed that inflation in the Harmonized Consumer Price Index (HICP) rose 0.3% from last month, marking the fastest rise in almost 30 years . One of the main drivers of inflation in Germany has been rising energy costs and supply chain disruptions affecting consumer prices. Christopher Dembik, head of macro analysis at Saxo Bank, said: “Germany is facing a perfect storm: the energy crisis, the friction in the supply chain, the skyrocketing inflation and workers’ ‘pay me my worth’ demands in addition to the fourth wave of the pandemic. large national economy of the EU.

Consumer and business confidence has been hit by sentiment towards the economy overshadowed by supply chain issues and a fourth wave of Covid.

The Covid threat has intensified in recent days with fears over the new Omicron variant causing market turbulence around the world since Friday.

Last week, when Olaf Scholz was appointed Chancellor to Angela Merkel, German GDP growth turned out to be below expectations with growth of just 1.7% for the third quarter.

It was followed by forecasts that GDP growth could decline further in the next quarter or even start to contract.

He explained: “The risk of stagnation or recession has increased.

“We are cautiously more optimistic for other European economies.

“They seem less inclined to reintroduce strict restrictions and they are less exposed to global trade turbulence.

“Think of France or Italy.”

With Germany accounting for almost a third of the EU economy, rising inflation and low GDP growth represent a major challenge.

Despite soaring inflation across Europe, the European Central Bank has largely rejected any suggestion of raising interest rates.

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Speaking this morning, Isabel Schnabel, a member of the board of the European Central Bank, suggested that it would be premature to raise interest rates, predicting that inflation had peaked in November.

She told German TV station ZDF: “Most forecasts actually assume that inflation will fall below 2%, so there is really no sign that the price increase is getting out of hand.”

“If we thought that inflation would definitely settle above 2%, we would certainly react. However, at the moment, we see no indication of this.”

Mr Brzeski predicted that inflation would more likely reach a “peak in December and start to decline in January”.

Part of this drop is said to be due to the impact of changes to German VAT rules which are expected to start disappearing by the new year.

He added that the expectation of a possible ECB rate hike remains at 2023.

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