Inflation in Germany continues to weaken. In October, prices increased only 3.8 per cent compared to the same period last year. The economy was stronger than expected in the third quarter.
October inflation is about 3.8%.
Inflation in Germany continues to decline. The first preliminary estimates were published by the Federal Statistical Office on Monday, and the cost of goods and services in October was on average 3.8 per cent higher than in the same period last year. This was the lowest inflation since August 2021, when it was the same as it is now. Given 4.5 per cent inflation in September, Reuters-surveyed economists had previously expected inflation to drop to 4.0 per cent in October.
The European Central Bank (ECB) believes that the ideal inflation rate for the euro economic zone should be 2 per cent. Last week, the Central Bank decided to suspend consecutive interest rate hikes in view of the weak economy and declining inflation data. Inflation in the euro area fell to 4.3 per cent in September and 5.2 per cent in August. In autumn 2022, inflation was once more than 10 per cent. Experts expect further reductions in inflation to 3.2 per cent in October.
Economic contraction is stronger than expected
Preliminary estimates by the Federal Bureau of Statistics also show that the gross domestic product (GDP) in the third quarter declined by only a small 0.1 per cent from the previous quarter. Economists had mostly predicted a sharp drop of about 0.3%. The recession is certainly an economic recession, but it may be moderate. The German economy is more stable than expected.
In terms of price adjustments, GDP declined by 0.8 per cent in the third quarter on a year-on-year basis. But this year's working day was short. After the adjustment, the decrease remained at 0.3 per cent.
The latter two quarters were also slightly updated by statisticians. To date, they have reported a change in the growth rate from -0.1 per cent to 0 per cent in the first quarter and an increase in the growth rate from -0 per cent to 0.1 per cent in the second quarter.
The slowdown in German economic growth was due mainly to high inflation, a sharp rise in interest rates, weak exports and the burden placed on most industries by rising energy prices. Hope lies in the increased purchasing power of consumers. Wages and salaries have increased faster than prices for the first time in two years. Inflation is slowing down.
Christoph Swanke of the Central Cooperative Bank of Germany commented on these data that “the period of weakness will continue. Economic recovery is not expected until early next year.”
For more than a year, Germany has hovered between low growth and a slight recession. With the revision of the statistics, economic stagnation and contraction are no longer going on.