MNI BRIEF: German GDP Weak Despite Gas Price Drop: IWH

German GDP will edge up just 0.4% in 2023, IWH Halle reported on Tuesday, with the positive effects of a fall in gas prices and storage at capacity, offset by the continued dampening effect of inflation -- which is expected to average 5.8% for the year -- higher interest rates, and declining real wages. (see MNI INTERVIEW: Germany Faces Permanent Loss of Competitiveness).

Tighter financial conditions are hitting the construction industry in particular, IWH vice president Oliver Hoeltemoller said, with foreign demand for German goods not enough to counter the effects of increased imports of some energy-intensive goods and the passthrough of lower energy prices to household incomes delayed.

“To combat inflation, the European Central Bank (ECB) is tightening its monetary policy sharply, and higher financing costs are exacerbating the cost crisis in the German construction sector,” Holtemöller said.