Germany's Economy Is Taking a Breather but Inflation Isn't, Bundesbank Warns

The German economy is taking "a breather" as a lack of goods and labour as well as new restrictions designed to fight the coronavirus pandemic put an end to its recent boom, the country's central bank said on Monday, Reuters reported. The Bundesbank also warned that inflation in Europe's largest economy was likely to stay well above 3% for some time and upcoming wage negotiations should deliver large increases. Germany's economy boomed in the first half of the year as services reopened for business. But it has since slowed as its industry was hit by supply disruptions and builders found it increasingly hard to find workers, the Bundesbank said. This could be an ominous sign for the global economy given Germany's crucial position in global supply chains and its role as Europe's growth engine. "The economic recovery will likely take a breather," the Bundesbank said in its monthly report. "From today's standpoint, GDP could tread water in the autumn quarter of 2021." The Bundesbank added inflation in Germany could come in just below 6% this month before easing next year as a 2020 VAT cut and other temporary factors fall out of the calculation. Still, the German central bank saw consumer prices growing by well more than 3% for a long time, with core inflation -- which strips out energy and food -- substantially above 2%. Read more.
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