Germany: growth constrained by shortages

The German economic institutes have published their autumn forecasts for this year and for 2022 by revising sharply down the increase of the GDP for 2021. Indeed, after having published a growth forecast of 3.7% last spring, they have clearly revised it down to only 2.4%. The German economy is more affected than its European partners by the problems of shortages and raw materials supply due to the structure of its economy more focused on manufacturing production. And, as a consequence, industrial activity in Switzerland would be impacted as well by this sharp slowdown. Unsurprisingly, the automotive sector is the most affected by chip and raw material shortages. Some factories are completely shut down until the end of the year (Opel) and others, such as Daimler, posted production levels down 30% in Q3 year on year. During the last quarter of this year it is therefore the services that should drive growth, such as the hospitality sector, but this is without taking into account the sharp increase in Covid contamination linked to the low vaccination rate across the Rhine. New restrictions are being put in place which should first and foremost penalise the service sector. Then, the German economy may not achieve 2.4% growth this year and not rebound 4.8% in 2022. Obviously, this is bad news for its trading partners. In the longer term, and given this slowdown in activity, inflationary pressures should not persist and the rise in prices should not exceed 2.5% next year before falling below 2% in 2023, which should reinforce the ECB in its policy not to tighten its monetary policy too quickly.