German Economy Shrank Less Than Initially Reported at Year End - BNN

(Bloomberg) --

The German economy shrank less than initially reported at the end of last year, with the statistics office citing uncertainty due to the pandemic as the major reason for the revision.

Output declined 0.3% in the fourth quarter, compared with a preliminary reading of -0.7%. The Bundesbank predicts the economy may also contract in the first three months of 2022 amid virus-related absence of workers across all sectors.

How strongly growth bounces back in the spring will depend on the fallout of Russia’s invasion of Ukraine, the persistence of supply disruptions and the speed at which Covid cases recede.

Economists have stressed that trade links between the two countries and Europe’s largest economy are small, leaving energy costs as one of the biggest risks to the outlook. Thursday’s escalation of the long-simmering crisis pushed commodity prices higher and sent oil above $100 a barrel for the first time since 2014. 

German inflation is already running above 5%, squeezing households’ purchasing power. In the fourth quarter, private consumption slumped 1.8%. Investment rebounded and trade also made a positive contribution.

Chancellor Olaf Scholz’s government coalition presented a 10-point package this week to alleviate price pressures on consumers and businesses. The abolishment of a renewable energy surcharge as of July and a three-month extension of special rules for state wage support are part of the plan.

©2022 Bloomberg L.P.

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German Economy Shrank Less Than Initially Reported at Year End - BNN
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