Berlin:Germany's economy experienced a temporary slowdown in the third quarter, although it remains on a recovery track. The Economy and Energy Ministry reported that high energy costs and shipping disruptions have been significant factors affecting economic activity.
According to Anadolu Agency, the ministry's October economic report highlighted that the growth rate likely decelerated after a strong first half of the year. This was attributed to a global reduction in stockpiling energy-intensive goods and low water levels impacting inland shipping routes. Additionally, domestic demand is expected to remain weak as rising energy prices diminish purchasing power, uncertainty continues, and financing costs increase.
The report noted that the goods-producing sector saw a 2% rise in production in August compared to July, after adjustments for prices, calendar, and seasonal effects. Construction output surged by 9.3%, partly due to the completion of a significant energy infrastructure project, while industrial output increased by 0.6%. Nevertheless, industrial production was on average 1.4% lower in July and August than in the second quarter, with energy-intensive industries facing particular challenges.
A significant decline in manufacturing orders was observed, falling 10.6% in August from July, largely due to fluctuations in large contracts like defense procurement. When excluding large orders, the decrease was only 0.1%. Despite a 2.7% drop in nominal exports of goods and services in August, exports remained 6.9% higher than a year ago.
Despite the weaker activity, business sentiment showed improvement. The ifo business climate index increased for the fifth consecutive month in September, reaching its highest point since May 2023, with companies viewing both current conditions and future prospects more positively.
Annual consumer inflation reached 3.3% in September, driven by a nearly 15% rise in energy prices. Core inflation, excluding food and energy, held steady at 2.4%. Food prices increased by 0.4%, and services prices rose by 2.7%. The ministry noted that the passing on of higher energy costs to consumers is expected to continue into the winter.
Retail sales saw a rebound of 1.3% in August following a 3.2% decline in July. However, consumer confidence weakened, with the GfK consumer climate indicator dropping to a five-month low for October.
In the labor market, conditions worsened as seasonally adjusted unemployment increased by 12,000 in September, and employment fell by 29,000 in August. The ministry anticipates that neither a decline in unemployment nor a rise in employment is likely in the coming months.