German retail sales and industrial production fall as inflation tightens
BERLIN, Oct 7 (Reuters) – Data on Friday showed the tightening grip of inflation on the German economy, with import prices soaring and industrial production and domestic sales falling. detail adding to signs that Europe’s largest economy is heading into recession.
Energy import prices rose 162.4% in August compared to the same month in 2021, as natural gas prices rose 306.3% year-on-year, the fallout from the war on Russia versus Ukraine continuing to shake up European energy markets.
Last month’s data showed that German inflation was at its highest in more than a quarter century in September, mainly due to high energy costs.
This is disrupting activity in an industry sector already struggling with supply chain issues and driving up costs for retailers, who are struggling to pass them on to cash-strapped shoppers.
Industrial production in August recorded a monthly decline of 0.8%, the biggest drop since March, the first full month of Russia’s invasion of Ukraine, the statistics office said.
Meanwhile, consumers were particularly reluctant to spend on groceries in August, the bureau said, with retail food sales down 1.7% on the month and 3.1% on the month. year – the lowest in more than five years.
“Looking at their wallets, many consumers will continue to rein in spending,” said Alexander Krueger, economist at private bank Hauck Aufhaeuser.
With sky-high energy prices weighing on both consumers and industry, an economic downturn seems inevitable, said ING economist Carsten Brzeski.
“The only question is how severe will such a contraction or recession be,” he said.
The German government expects the economy to contract by 0.4% next year, sources told Reuters on Thursday, citing provisional figures. The government is due to release its forecast on Wednesday.
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Reporting by Miranda Murray and Rene Wagner Editing by Rachel More and Mark Potter
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