German companies envision mild recession

German companies expect only a mild recession next year, despite headwinds stemming from the energy crisis, raw material shortages and a tepid global economy.

“It is likely that the last quarter of this year and the beginning of 2023 will be accompanied by a decline in economic activity (…) However, we expect a slight slump,” said Siegfried Russwurm, president of the Federation of German Industries.

There are growing signs that the German economy could avoid the worst of an economic downturn caused by the collapse of Russian gas supplies.

Inflation fell to 11.3% annually in November, from 11.6% in October, due to lower energy prices. The government expects the economy to grow 1.4% this year and contract 0.4% next.

Russwurm warned that growth will remain subdued through 2024 as weak global demand weighs on Germany’s export-dependent economy.

The Association of German Chambers of Industry and Commerce (DIHK, for its acronym in German), said there are signs that supply chain disruptions are subsiding.

“Container freight rates are approaching normal values ​​in the long term and congestion outside international ports is decreasing,” said Peter Adrian, DIHK Chairman.

“If Chinese ‘Zero Covid’ policy relaxations are implemented it would also be a positive sign for supply chains,” he added.

The DIHK warned that rising energy prices and consumer mistrust clouded the outlook for 2023.

The Association of Wholesale, Foreign Trade and Services stated that the situation is solid but that negative expectations are dragging from one month to the next.