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COVID-19: German GDP slows on slump in investments

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DOWNBEAT: A fourth wave of the pandemic and a high inflation rate of 4 percent are affecting consumers’ purchasing power, an analyst said

  • Bloomberg and AFP

The German economy expanded less than initially reported in the third quarter, hampered by a drop in investment spending.

Total output increased 1.7 percent, below the 1.8 percent reading by Germany’s statistics office late last month.

Private consumption was the big driver during the three-month period, increasing 6.2 percent. However, the government cut its expenditure, while investment in machines and vehicles slumped 3.7 percent, and that in construction dropped 2.3 percent.

Photo: AP

With its focus on manufacturing, Europe’s largest economy has faced headwinds due to the global supply crunch, with automakers particularly affected by a shortage in chips.

That has led to downward revisions to the growth outlook, and a worsening of pandemic now has the country on alert for a possible lockdown.

INFLATION CONCERNS

Moreover, unprecedented inflationary pressures are threatening to restrain German output in the coming months. Inflation data due Monday might show a November reading just under 6 percent, the Bundesbank said.

German shoppers are feeling downbeat as the Christmas period beckons, a key survey showed yesterday, with concerns about soaring COVID-19 infections and higher prices gnawing away at festive cheer.

Pollster GfK’s forward-looking barometer fell to minus-1.6 points for next month, down 2.6 points on the previous month.

“On the one hand, there is the fourth wave of the pandemic with exploding incidence rates, the risk of an overburdened healthcare system and the fear of further restrictions,” GfK consumer expert Rolf Buerkl said.

“On the other hand, a high inflation rate of around 4 percent right now is causing consumers’ purchasing power to melt away,” he said. “This dampens the prospects for the upcoming Christmas business.”

Germany has tightened COVID-19 curbs to combat the worsening pandemic, including canceling Christmas markets, and barring the unvaccinated from bars, gyms and leisure centers in the hardest-hit regions.

PESSIMISM

The GfK survey of about 2,000 people found that Germans were significantly more pessimistic about the state of the economy than last month.

Income expectations also dropped, while the willingness to splash out on big purchases hit a nine-month low, the pollsters said.

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