Ifo Sees CPI Peaking at 11% 2023, 'Winter Recession'

IFO GDP FORECAST Q3 2022 0.0%, Q4 2022 -0.2%, Q1 2023 -0.4%

IFO 2022 GDP FORECAST +1.6%, 2023 -0.3%, 2024 +1.8%

IFO 2022 CPI AVERAGE RATE +8.1%, 2023 +9.3%, 2024 +2.5%

• The ifo economic forecast for Autumn sees inflation choking private consumption ahead of a contractive winter. The report is uncomfortable reading for the ECB, which appears to be hiking into a recession.
• The annual average CPI rate is forecast is higher, at +8.1% for 2022, accelerating to +9.3% for 2023, peaking at approx. 11% in Q1 2023. The third energy relief package will ease burdens only partially.
• Post-re-opening effects are all but over, with consumer sentiment at a fresh record low on the back of recession fears and energy price concerns. As such, spending in customer-facing services has deteriorated notably.
• Supply chain issues and shortages remain persistent, despite falling new orders relieving some pressure on industry. Production remains bolstered by backorders. Construction is to see the largest decline as investment slows due to rising interest rates.
• Unemployment is anticipated to tick up marginally next year due to the inclusion of Ukrainian refugees, the labour market remaining otherwise stable.
• Substantial uncertainty remains in energy price developments and the extent of consumer spending slowdown over the next six months.