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ECONOMY

German recession could be less severe than expected, survey shows

German business confidence improved in November, a key survey said Thursday, as hopes grow that a looming recession in Europe's top economy will be less severe than feared.

An employee at a shop handles cash. Germany is facing tough times economically, according to experts.
An employee at a shop handles cash. Germany is facing tough times economically, according to experts. Photo: picture alliance/dpa | Fabian Sommer

The Ifo institute’s monthly confidence barometer, based on a survey of about 9,000 companies, reached 86.3 points, rising for a second month after a revised 84.5 points in October.

Before October, the reading had fallen for four months straight.

“Sentiment in the German economy has improved,” Ifo president Clemens Fuest said in a statement.

“Pessimism regarding the coming months reduced sharply. The recession could prove less severe than many had expected.” 

READ ALSO: Has Germany’s sky-high inflation finally peaked?

Germany is facing soaring inflation – consumer price rises hit 10.4 percent in October – driven by high energy costs after Russia slashed gas supplies following its invasion of Ukraine.

The government has forecast that Europe’s economic powerhouse will contract 0.4 percent in 2023, with inflation set to remain stubbornly high.

But hopes are growing that government relief measures – including a €200 billion package to shield companies and citizens from inflation – will soon bring prices down.

Germany’s gas storage facilities were completely filled up earlier this month, easing fears of winter shortages.

Carsten Brzeski of ING bank said the Ifo survey “adds to recent glimmers of hope that the German economy might avoid a winter recession.”

But he added the government stimulus “will come too late to prevent the economy from contracting in the fourth quarter.

“However, it is substantial enough to cushion the contraction and to turn a severe winter recession into a shallow one.”

Other surveys have started to show signs of improvement.

Earlier this month, a ZEW institute survey showed an increase in investor confidence for the second consecutive month.

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ECONOMY

German trade surplus shrinks amid Ukraine war and energy crisis

Germany's much-vaunted trade surplus shrank in 2022, official data showed Thursday, as soaring energy prices in the wake of the Ukraine war pushed up the cost of imports.

German trade surplus shrinks amid Ukraine war and energy crisis

Germany exported goods to the value of €1.56 trillion, up 14 percent on a year earlier, federal statistics agency Destatis said in seasonally adjusted figures.

But imports rose by more than 24 percent to €1.48 trillion, resulting in a trade surplus of €76 billion.

Destatis said it was “the lowest surplus” since 2000 and down by more than half compared with last year’s €173.3 billion figure.

The bill for imports rose much more strongly “on account of the sharply increased prices of energy” following Russia’s invasion of Ukraine, the agency said.

READ ALSO: Why fears of a recession in Germany are rising

It is the fifth consecutive year that the trade surplus has narrowed in Europe’s biggest economy, it added.

The United States remained the top destination for “made in Germany goods”, while China was once again the largest source of imports.

The shrinking surplus in export champion Germany comes at a time of growing concern about the competitiveness of European companies in the face of US plans for a major subsidy package to green its economy.

The European Union is working on proposals to counter the threat, including a possible relaxation of state aid rules.

Germany’s BDI industry association on Thursday called for “swift, concrete results” on the issue.

It also urged the government to pursue EU-level trade agreements with “important partners” such as Latin American countries, India or Indonesia to diversify trade ties.

“The aim must be to drive forward the internationalisation of the German economy,” it said.

READ ALSO: Germany sees record post-war inflation in 2022

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