There are increasing signs that the German economy is slipping into a recession, Bundesbank said in its monthly report released Monday.
Real gross domestic product is likely to decline somewhat in the current quarter and shrink significantly in the winter months, the central bank said.
The bank cited the extremely tense situation in the energy supply after the war in Ukraine as the major reason for the current weakness.
“The high inflation and the uncertainty regarding the energy supply and its costs affect not only the gas and electricity-intensive industry and its export business and investments, but also private consumption and the service providers dependent on it,” experts at Bundesbank said.
Experts forecast a noticeable decline in economic output in the fourth quarter and also in the first quarter of next year. The outlook is extremely uncertain, the bank noted.
Despite the deterioration in the economic outlook, the bank expects the labor market to remain resilient.
On the price front, experts said with the expiry of the nine-euro ticket and the tank discount on September 1, there were price jumps for petrol and diesel. This would lead to renewed price increases for energy and services in the current month and a corresponding increase in the inflation rate.
Inflation is forecast to move into the double digits in the next few months, Bundesbank added.
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