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German institutes cut 2021 growth forecasts

By Abigail Townsend

Date: Thursday 14 Oct 2021

LONDON (ShareCast) - (Sharecast News) - A group of leading economic think tanks have cut their forecasts for German growth this year, as supply chain disruptions weigh heavily on the manufacturing sector.
Publishing their latest joint forecast, the five German institutions predicted GDP would rise by 2.4% in 2021, compared to an earlier forecast for growth of 3.7%. However, they upgraded their forecast for 2022 to 4.8% from 3.9% previously.

The report noted that the coronavirus pandemic "still shapes the economic situation in Germany".

It continued: "A complete normalisation of contact-intensive activities is not to be expected in the short term. In addition, supply bottlenecks are hampering manufacturing for the time being.

"The German economy will reach normal capacity utilisation in the course of 2022."

Supply chain disruptions are hitting Germany's manufacturing-reliant economy hard. On Wednesday, data from Eurostat showed industrial production fell 1.6% in August in the Eurozone, and by 4.1% in Germany.

The joint forecast said only consumer-related service industries were currently growing, meaning "the recovery will still be slowed down in winter 2021/22, since activity in the service sector will remain below the usual level during the cold season, even with low levels of infection.

"In additional, supply bottlenecks will continue to weigh on manufacturing production for the time being."

The five institutes - DIW Berlin, ifo Institute, IfW Kiel, IWH and RWI - expect consumer prices to rise 3% in the current year and by 2.5% in 2022. That compares to their previous forecasts for 2.4% for 2021 and 1.7% in 2022.