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ECONOMY

German consumer prices hit 29-year high in November

German consumer prices hit a 29-year high in November, preliminary data showed Monday, as soaring energy costs and supply chain bottlenecks weigh on Europe's top economy.

Woman shopping in German supermarket
A customer walks through the aisles of a supermarket in Haßloch, Rhineland-Palatinate. Photo: picture alliance/dpa | Uwe Anspach

The annual inflation rate rose to 5.2 percent, accelerating for the fifth month in a row, with the surge partially driven by a 22-percent jump in energy prices, federal statistics agency Destatis said.

In October, prices had climbed by 4.5 percent year-on-year.

Germany’s central bank said earlier this month that German inflation could spike to just under six percent this year.

The higher cost of living is being experienced across the eurozone at the moment, putting pressure on the European Central Bank to tighten its ultra-loose monetary policy.

The ECB has so far insisted that the inflation surge in the 19-nation zone is transitory, and is wary of acting too soon and potentially stifling the pandemic recovery.

But Bundesbank chief Jens Weidmann, who is stepping down at the end of the year, has warned that the price hikes could last longer than expected.

Using the ECB’s preferred yardstick, the Harmonised Index of Consumer Prices (HICP), German inflation jumped to six percent in November — well above the bank’s two-percent target.

Higher demand after the easing of coronavirus restrictions has pushed up energy prices and led to shortages of key materials and labour around the world.

But Germany also suffers from the comparison effect with 2020, when the country introduced a temporary sales tax cut, as well as the introduction of CO2 pricing at the start of 2021, according to Destatis.

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Carsten Brzeski, economist at ING Diba bank, called November’s inflation figure “a shocker” but said the peak had yet to come.

“The December inflation number could be a new record high since German reunification,” he said. “One-off factors like base effects from higher energy prices and post-lockdown price mark-ups” will “gradually start to abate”, he added.

“However, it could take until the end of 2022 before headline inflation will drop below two percent, if not until 2023.”

Member comments

  1. There is no such thing as transitory inflation. Just inflation. Look at the producer prices index. Look at what’s coming down the pipeline . And then imagine that there won’t be any wage inflation to keep the whole process fuelled. Finally, imagine that inflation in the other Eurozone countries doesn’t let rip. The ECB won’t deal with it because its bankrupt members can’t afford the measures it needs to take . Make sure your pension is index-linked and buy a good wheelbarrow.

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ECONOMY

‘Tougher times’: Sweden’s economy to slow next year

Consumers in Sweden are set to crimp spending over the rest of the year, pushing the country into an economic slowdown, Sweden's official economic forecaster has warned in its latest prognosis.

'Tougher times': Sweden's economy to slow next year

A combination of record high energy prices over the winter, rising interest rates, and inflation at around 10 percent, is set to hit household spending power over the autumn and winter, leading to lower sales for businesses and dragging economic growth down to just 0.5 percent next year. This is down from the 1.2 percent the institute had forecast for 2023 in its spring forecast. 

“I don’t want to be alarmist,” Ylva Hedén Westerdahl, forecasting head at the Swedish National Institute of Economic Research, said at a press conference announcing the new forecast. “We don’t expect the sort of economic slowdown that we saw during the financial crisis or the pandemic, where unemployment rose much more. But having said that, people who don’t have a job will find it tougher to enter the labour market.” 

She said that a shortage of gas in Europe over the winter, will push electricity prices in Sweden to twice the levels seen last winter, while the core interest rate set by Sweden’s Riksbank is set to rise to two percent. 

As a result, Sweden’s unemployment rate will rise slightly to 7.8 percent next year, from 7.7 percent in 2022, which is 0.3 percentage points higher than the institute had previously forecast. 

On the plus side, Westerdahl said that she expected the Riksbank’s increases in interest rates this year and next year would succeed in getting inflation rates in Sweden under control. 

“We expect a steep decline in inflation which is going to return to below two percent by the end of 2023,” she said. “That depends on whether electricity prices fall after the winter, but even other prices are not going to rise as quickly.” 

After the press conference, Sweden’s finance minister, Mikael Damberg, said he broadly agreed with the prognosis. 

“I’ve said previously that we are on the way into tougher times, and that is what the institute confirms,” he told Sweden’s state broadcaster SVT. “There’s somewhat higher growth this year, at the same time as fairly high inflation which will hit many households and make it tougher to live.”

Damberg called on Sweden’s political parties to avoid making high-spending promises in the election campaign, warning that these risked driving up inflation. 

“What’s important in this situation is that we don’t get irresponsible when it comes to economic policy,” he said. “Because when parties make promises left, right and centre, it risks driving up inflation and interest rates even more, so Swedish households have an even tougher time. Right now, it’s important to prioritise.” 

 The call 

Sverige är på väg mot lågkonjunktur enligt Konjunkturinstitutets (KI) senaste prognos. Enligt finansminster Mikael Damberg (S) är det därför viktigt att Sverige sköter sin ekonomi ansvarsfullt och vågar prioritera.

– Jag tror att alla partier behöver vara lite återhållsamma och inte lova för mycket, säger han.

Mikael Damberg tycker att KI tecknar en realistisk bild av Sveriges ekonomiska verklighet.

– Jag har sagt tidigare att vi går mot tuffare tider och det är väl det som KI bekräftar. Något högre tillväxt i år men sämre tillväxtförutsättningar nästa år samt fortsatt ganska hög inflation som slår mot många hushåll och gör det tuffare att leva, säger han.

Och vad vill regeringen göra åt det?

– Det är viktigt att vi i det här läget inte är ansvarslösa i den ekonomiska politiken. För när partier lovar vitt och brett till allt riskerar vi att driva upp inflationen, öka räntan ytterligare och svenska hushåll får det svårare. Nu måste man våga prioritera.

Se intervjun med Damberg om konjunkturläget klippet ovan.

“Electricity prices are going to be twice as high as last winter,” said 

Elpriserna kommer att bli dubbelt så höga som förra vintern, säger Ylva Hedén Westerdahl, chef för Konjunkturinstitutets prognosavdelning, på en pressträff.
Den lågkonjunktur som KI ser framför sig kallar hon trots det för en mjuklandning. Den handlar främst om att människor kommer att ha mindre pengar att konsumera.

“Brist på gas i Europa gör att energipriserna ser ut att bli rekordhöga under vintern”, skriver KI, och ser att inflationen kommer att närma sig 10 procent.

Deras prognos för styrräntan är att den ligger på 2 procent vid årsslutet, vilket gör att inflationen faller tillbaka snabbt under nästa år och Riksbanken låter då räntan ligga still.

KI tillägger att de offentliga finanserna är fortsatt starka och de bedömer att det finns ett budgetutrymme på runt 120 miljarder kronor för de kommande fyra åren.

Vad gäller BNP spår KI en blygsam tillväxt på 0,5 procent nästa år – en nedskrivning från tidigare 1,2 procent.

Prognosen för arbetslösheten under 2023 är 7,8 procent, 0,3 procentenheter högre än tidigare prognos.

Fredrik Fahlman/TT
Johanna Ekström/TT

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