The macroeconomic data of Germany have returned to give hopeful signs this Tuesday. Consumer price growth in November slowed for the first time since July. Year-on-year inflation, at 10%, has surprised us by falling below the forecasts that placed it at 10.4%, the same figure that it registered in October. This is preliminary data that has to be confirmed on December 13, but many analysts believe that inflationary pressures are beginning to subside and that the German CPI could have reached its peak.
Industrial prices, which include the cost of products ex-factory, gave a first positive surprise by falling in October for the first time in two and a half years. Despite being 34.5% above those of a year ago, experts see a first sign of a slowdown in inflation. The growth of 0.4% of the German Gross Domestic Product (GDP) in the third quarter also encouraged hope that the announced recession would be less deep than predicted. Forecasts indicate that at least this quarter and the first of 2023 growth will contract.
The increase in prices in November is mainly due to the energy sector, with a year-on-year rise of 38.4%, and food, which has climbed 21%, according to the CPI data reported by the office on Tuesday German Federal Statistical Office, Destatis. The figures are based on estimates from some federal States, which already from early in the morning were reporting data showing that inflationary pressure is easing slightly.
The statistical office recalls that, since the beginning of the war in Ukraine, energy and food prices are the ones that have increased the most and, therefore, display a “considerable influence” on the inflation rate. While the bill for the shopping basket continues to rise at a higher than average rate, in fuels, electricity and heating “a slight relaxation is observed”, says the statistical office. The German CPI has been above 7% for nine months and has registered double digits since last September.
Wages fall behind
At the same time, wages are falling behind. That is to say, the Germans are losing purchasing power at a forced march. Another Destatis report confirms that real wages decreased by 5.7% in the third quarter compared to the same period last year. While nominal income increased by 2.3%, inflation grew by 8.4% in the same period and more than ate up the rise in wages. The office highlights that it is the fourth consecutive quarter in which German employees have had to deal with a loss of real wages. In relation to the same quarter of the previous year, the decreases have been 1.4% in the last of 2021, and 1.8% and 4.4% this year.
In its latest report, from last week, Deutsche Bank pointed out: “There is less risk of gas shortages, but the shock of real income will be felt.” Its analysts concluded that the filling of deposits to 100% and the fiscal support to households, greater than expected, suggest that the recession “will not be as deep as expected a few weeks ago”, although families were going to face a drastic drop in your income.
Wage increases of 8.5%
The German government has been negotiating with unions and employers to try to alleviate the impact of rising prices while avoiding entering an inflationary spiral. A few days ago, the IG Metall union agreed with the companies in the sector a wage agreement with increases of 8.5% spread over two years. The organization, the largest and most powerful in Germany, staged several “warning” strikes earlier this month to demand an inflation-compensating raise.
Although the employers assured that energy prices did not leave them much room to improve salaries, an agreement was finally reached that includes single payments as a compensation premium to alleviate the effect of the rise in the CPI. The coalition of social democrats, greens and liberals headed by Olaf Scholz has been promoting these tax-free payments of up to 3,000 euros so that workers can face the higher cost of living without having to raise nominal wages.
From Russia to the Persian Gulf: Germany signs a 15-year contract to import gas from Qatar
Qatar, the country where the World Cup is being held, announced on Tuesday an agreement to supply liquefied natural gas (LNG) to Germany for 15 years in the midst of an energy crisis aggravated by the Russian invasion of Ukraine last February. Qatar wants to contribute to “efforts to support energy security in Germany and in Europe,” the Qatari Minister of Energy declared at a press conference. The contract has been signed between Qatar Energy and the American company ConocoPhilips.
The agreement comes after lengthy negotiations that included the visit to the country in March of the German Minister of Economy and Climate, the green Robert Habeck, and the chancellor himself, Olaf Scholz, just a few weeks ago. According to various experts quoted by the German press, the arrival of Qatari gas is not the solution to the current problem. Supply will not start until 2026. Germany plans to be climate neutral by 2045, so it should not maintain gas consumption beyond 2040.
Qatar will supply “up to two million tons of LNG a year,” according to its minister. Qatar’s main gas market is currently in Asia, especially China, Japan and South Korea, countries with which it usually signs much longer-term agreements. However, since Europe is looking for new energy suppliers to reduce or eliminate its dependence on Russia, Qatar is in the crosshairs of countries like Germany, which, although it has full tanks for this winter, has to think about supply from next winter.
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