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German Companies Anticipate A Mild Recession As The Disruptions Subside

German Companies Anticipate A Mild Recession As The Disruptions Subside
Despite challenges from the energy crisis, a lack of raw materials, and a sluggish global economy, German companies expect only a mild recession next year, according to a survey of major associations published by Reuters on Tuesday.
"The last quarter of 2022 and the start 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 slump."
There are more and more indications that the German economy may be able to withstand the worst of a downturn brought on by a drop in Russian energy supply following the invasion of the Ukraine.
As energy prices decreased, inflation moderated to 11.3% in November from a peak of 11.6% the previous month. According to forecasts from the German government, the economy will expand by 1.4% this year and contract by 0.4% the following year.
Russwurm foresaw that growth would be moderate until 2024 as weak global demand affected Germany's export-reliant economy.
There are numerous signs, according to the Association of German Chambers of Industry and Commerce (DIHK), that supply chain disruptions are gradually subsiding.
"Freight rates for container prices are approaching long-term normal values again, and the congestion outside international ports is slowly easing," said DIHK President Peter Adrian.
"If the announced relaxations of China's zero-COVID policy are implemented, it would also be a positive signal for global supply chains," he added.
The DIHK cautioned that the outlook for 2023 was still clouded by rising energy costs and a decline in consumer confidence.
Similar to the DIHK, the ZDH association of craftsmen claimed that noticeably fewer orders were coming in for the upcoming year.
"The order backlog will still carry us until the beginning of spring, but there are many question marks for the time after that," ZDH Secretary General Holger Schwannecke said.
According to the German Wholesale, Foreign Trade and Services Association (BGA), many economic sectors are still doing well. BGA President Dirk Jandura said, "But we are carrying over negative expectations from month to month, whose depth and breadth have not yet been realized.
He asserted his confidence in businesses' ability to resume their upward trajectory during the spring.

Christopher J. Mitchell

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