Upward revision to our Germany inflation forecast

The recent surge in energy prices and worsening supply chain disruption will keep Germany’s inflation rate higher next year than we had anticipated. However, we still think inflation will fall from a peak of around 5% to 2% or so by end-2022 and beyond that, it will probably settle below the ECB’s target.
Andrew Kenningham Chief Europe Economist
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European Economics Weekly

Euro-zone GDP barely grew in Q4, inflation risks rise

Data released this week suggest that our assumption that euro-zone GDP rose by 0.2% in Q4 could be too optimistic, but we still think that the economy will grow in Q1. Meanwhile, rapid house price inflation adds to the case for the ECB to, in Jay Powell’s words, start thinking about thinking about raising interest rates.

14 January 2022

European Data Response

German GDP (2021)

Provisional data showing that Germany’s GDP increased by 2.7% last year and news that it shrank in Q4 underlines that its recovery has lagged many of its peers, including the US, France and the UK. We think that German GDP will expand by less than the consensus expects this year too.

14 January 2022

European Economics Update

ECB likely to raise rates to zero in 2023

With pandemic-related inflationary pressures proving a bit more intense and persistent than we had anticipated, and policymakers sounding more willing to tighten policy, we think the ECB is most likely to end net asset purchases in December 2022 and raise its deposit rate to zero by end-2023. Drop-In: Neil Shearing will host an online panel of our senior economists to answer your questions and update on macro and markets this Thursday, 13th January (11:00 ET/16:00 GMT). Register for the latest on everything from Omicron to the Fed to our key calls for 2022. Registration here.

12 January 2022

More from Andrew Kenningham

European Data Response

Euro-zone GDP (Q3)

The solid increase in euro-zone GDP in the third quarter means that the recovery phase is now almost complete in most of the euro-zone. Growth will be much slower in Q4 because the boost from reopening has now passed, while supply chain disruption and slowing global demand will take a toll.

29 October 2021

European Economics Update

ECB sticking to view that inflation is transient

The ECB stuck to its script today, arguing that although the increase in inflation now underway will be larger and last longer than previously anticipated, it is still temporary. Meanwhile, confirmation that the PEPP will end in March tells us nothing about the future of its standard asset purchases.

28 October 2021

European Data Response

German Ifo Survey (October)

The fourth successive monthly fall in the Ifo Business Climate Index provides more evidence – if it were needed – that supply side disruption is causing the German economy to slow sharply and suggests that the problems are extending beyond manufacturing. We expect the economy to do no more than tread water in the last three months of the year.

25 October 2021
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