Struggling German economy hit by falling production – unable to meet export demands | World | News


The EU nation is struggling to meet export demands due to dry materials. The news comes as data suggests the country saw a reduction in production between October and November. The main production chains in industry, construction and energy supply recorded a decline of 0.2%, according to the Federal Ministry of Economics.

Although the fall in production is not a large number, it runs counter to the projected rise in production levels, which some economists believe could reach 1%.

Current production rates are approximately 7% lower than February 2020, which coincided with restrictions imposed by the onset of the global COVID-19 pandemic.

Since the industry alone was able to increase production by 0.2% in November, the ministry believes there is reason to be optimistic.

The deterioration caused by the bottlenecks in deliveries should, however, continue for a few more months. “After their dissolution – in view of the well-filled order books – dynamic growth can be expected,” the ministry said.

Exports went surprisingly well. They increased in November by 1.7% compared to the previous month, as announced by the Federal Statistical Office.

Economists expected a minus of 0.2%. Imports even increased by 3.3%, while analysts expected a drop of 1.7%.

Business order books are currently full to bursting.

In recent months, however, orders could not be processed due to major bottlenecks of intermediate products such as microchips.

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The shortage of materials in industry worsened again at the end of 2021: 81.9% of companies complain more than ever about bottlenecks and problems with the supply of preliminary products and raw materials.

Given that the problems are expected to persist for some time, the recovery this year will be weaker than expected, according to forecasts from leading institutes.

The Kiel Institute for the World Economy (IfW), for example, lowered its forecast for GDP growth in 2022 from 5.1 to 4.0%.

Germany is also suffering from record levels of inflation, which in turn are increasing production costs, although the rate fell slightly in December.

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German annual inflation slowed in December for the first time in six months, but remained well above the European Central Bank’s price stability target of 2% for the eurozone as a whole.

The reading from Germany, the euro zone’s largest economy, may indicate that inflation across the bloc peaked in November at a record 4.9%.

On a larger scale, the rest of the European Union, and in particular the countries using the euro, also saw inflation hit hard.

Inflation in the 19 countries that use the euro has reached its highest level ever, driven by soaring food and energy prices.

Consumer prices in the eurozone, made up of European Union economies such as France and Italy, rose 5% in December from a year earlier, according to Eurostat, the statistics office of the EU.

Energy prices led the rise, jumping 26% over the past year, slightly less than the previous month.

Food price inflation accelerated to 3.2% from 2.2% in November, and the price of goods rose at a faster pace of 2.9%.

This means that everything from food in supermarkets to groceries and fuel costs more, as the economic recovery from the pandemic has increased demand for energy and hampered global supply chains.

As Germany sees its former finance minister, Olaf Scholz, now occupy the post of chancellor, the challenge now is to curb the rate of inflation and reintroduce a stable and efficient production chain across German industries. .

Additional reporting by Monika Pallenberg


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