According to a survey released on Tuesday, German consumer sentiment will deteriorate further at the start of next year, as the COVID-19 pandemic and the development of the Omicron variation push Europe’s largest economy to the edge of recession throughout the winter.
The GfK market research organisation in Nuremberg reported that its consumer sentiment index, which is based on a survey of approximately 2,000 Germans, dropped to -6.8 points in January, down from a corrected -1.8 points a month earlier.
The January figure was the lowest since June, and it fell short of the Reuters projection of a -2.5 decrease.
According to the Berlin-based DIW research firm, the country’s GDP will contract in the fourth quarter of this year.
During the same period, , the outlook for the first quarter of 2022 appears bleak, as industry continues to experience supply disruptions, and consumption could be further restricted, according to DIW.
The Ifo economic institute forecasted that Germany’s economic output will contract by 0.5 per cent in the third quarter from October to December and remain unchanged in the fourth quarter from January to March.
This would push Germany dangerously near to a technical recession, which is described as two quarters of decline in a row.
The high rates of infection of the fourth coronavirus wave, generated by the Delta type, have already resulted in limits for shops and service providers, according to GfK economist Rolf Buerkl.
In an effort to contain the spread of the disease, Germany restricted unvaccinated people from entering non-essential facilities at the beginning of the month.
According to Buerkl, the so-called 2G rule, which prevents the access to vaccinated or recovered people, has had a significant impact on the Christmas industry.
“The outlook for the beginning of next year is also subdued against the background of the rapid spread of the Omicron variant,” Buerkl said.
According to Ifo economist Klaus Wohlrabe, the renewed limitations have resulted in temporary job cuts in the hotel, tourism, leisure, and entertainment industries.
At a pandemic emergency conference later Tuesday, German Chancellor Olaf Scholz and premiers from the country’s 16 states are likely to debate more restrictions.
After specialists warned that the Omicron variety could push key infrastructure to a breaking point, stronger contact restrictions and an accelerated vaccine booster campaign are being considered.
After a pandemic-related drop of 4.6 per cent in 2020, the German economy is predicted to rebound with a weaker-than-expected annual growth rate of 2.6 per cent this year. This means it won’t be back to pre-crisis levels until the following year.
The government predicts a growth rate of 4.1 per cent in 2022.
(Adapted from USNews.com)