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German inflation hits record 10% in September

DW logo DW 29/09/2022

Germany's inflation rate increased to a record 10% in September. The news comes after economic institutes predicted the economy shrink next year.

Leading economic think tanks believe the German economy will go into recession © Britta Pedersen/dpa/picture alliance Leading economic think tanks believe the German economy will go into recession

Pushed by high energy and food prices, inflation rose to 10% in September in Germany.

The inflation announcement follows a forecast by a leading group of think tanks earlier on Thursday that painted a bleak picture for Germany's future economic prospects.

According to the think tanks' projections, the crisis in the gas markets, spiraling energy prices and a massive drop in purchasing power would push the German economy into recession.

The high cost of energy was the leading factor "driving Germany toward recession," said Torsten Schmidt, head of economic research at the RWI think tank.

Schmidt told a media briefing that Europe's largest economy would shrink over the second half of 2022.

Incomplete recovery from the global pandemic was among the factors contributing to Germany's economic future.

Inflation expected to average at 8.8 percent

"In the coming year, inflation will likely rise even further to an average of 8.8 percent for the year," Munich's ifo Institute said in a statement.

Inflation was being spurred on by rising energy prices which have soared since the Russian invasion of Ukraine.

However, inflation was expected to settle down in 2024, "to be only slightly above the ECB’s target rate of 2 percent."

German GDP was also expected to shrink by 0.4% in 2023, down from April's estimate of 3.1% growth, before rebounding back to a state of growth in 2024.

The forecasts came Thursday as part of the so-called Joint Economic Forecast, which is prepared twice a year by the ifo Institute in Munich, the Kiel Institute for the World Economy, the Halle Institute for Economic Research (IWH), and the RWI – Leibniz Institute for Economic Research.

Global Economy in the doldrums

Germany is not alone in the economic challenges it is facing. According to the joint statement the global economy is in a downturn, with Russia's war against Ukraine and subsequent Western sanctions against Moscow fueling the level of inflation for energy commodities.

The high levels of inflation have prompted the US Federal Reserve, along with many other central banks, to tighten monetary policy.

The joint report also pointed to China's zero-covid strategy which prohibits economic activity during periods of lockdown, along with a bubbling real estate crisis which were impacting the economy.

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kb/sms (AFP, dpa)

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