Wednesday, May 25

DIW: Omikron wave slows down German economy at the beginning of the year

By Andreas Killer

BERLIN (Dow Jones) — The economic barometer of the German Institute for Economic Research (DIW) fell slightly in January, according to the institute. After being just above the 100-point threshold in the fourth quarter of 2021, it has now fallen below it with an index level of 99.5 points for the first quarter of 2022. “Economic output in Germany is likely to have eased somewhat in the final quarter,” explained the DIW. Mainly because of the current omicron wave, there are now signs of a slight decline for the beginning of the year. “The currently enormously high number of corona infections is slowing down the German economy,” said DIW expert for the German economy, Simon Junker.

In the industry, however, there are more and more indications that the material bottlenecks are gradually easing. After all, production in the automotive industry, the largest and most affected by supply bottlenecks, is picking up sharply. Overall, according to the DIW, companies in Germany should gradually start producing more again. “If the supply chains have recovered in a few months, the rosy order situation should lead to a strong boost in production,” said Junker.

The contact-intensive service providers, on the other hand, are again directly affected by the most recent waves of infections. For example, sales in the hospitality industry had already fallen by almost double digits in November, and company surveys, data on restaurant reservations and mobility data pointed to further declines around the turn of the year. If the Omikron wave peaks in mid-February, as forecast, the affected service sectors would have to hold back until shortly before Easter. However, not least because of the progress in vaccination, significantly more activity is possible than a year ago.

“All in all, the beginning of the year is still dominated by the pandemic, but the prospects for a recovery in the spring are good,” explained the DIW. Under these circumstances, the labor market will probably only falter temporarily, with only a moderate increase in short-time work compared to the past two years.

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(END) Dow Jones Newswires

January 27, 2022 04:30 ET (09:30 GMT)