German industry is warning of the devastating consequences for the economy of record low water levels on the Rhine.
(Photo: IMAGO/Jochen Tack)
Manheim Stock market professionals continue to view the German economy with skepticism because of high inflation. The barometer for the assessment of the economy in the next six months fell in August by 1.5 to minus 55.3 points and thus for the second time in a row, as the Mannheim Center for European Economic Research (ZEW) stated in its monthly survey on Tuesday 176 analysts and investors announced.
Economists had expected stagnation. The experts also assessed the current situation more pessimistically. The assessment of the economic situation also declined. It dropped 1.8 points to minus 47.6 points. Economists had expected minus 49.0 points here.
Meanwhile, the drought is causing record low water levels on the Rhine. German industry is therefore warning of the devastating consequences for the economy.
“The persistent dry period and the low water threaten the security of supply for industry,” said the deputy general manager of the Federation of German Industries (BDI), Holger Loesch. “Companies are preparing for the worst.” The already tense economic situation is getting worse.
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A water level of zero centimeters was measured for the first time in Emmerich near the border with the Netherlands, said a spokesman for the Waterways and Shipping Office. However, the water level is not synonymous with the fairway depth, which is decisive for shipping. This was recently just under two meters in Emmerich. “Ships can continue to operate,” said the spokesman. “But they must adjust their charge accordingly.”
“Recession has already started”
The ZEW economic expectations deteriorated slightly again in August, after a very strong decline in July, commented ZEW expert Michael Schröder on the development. The financial market experts expected a further deterioration in the already weak economy.
“The continuing high increase in consumer prices and the expected additional costs for heating and electricity are currently having a negative impact on the prospects for the consumer-related sectors of the economy in particular.” The assessments for the financial sector, on the other hand, improved due to the turnaround in interest rates that had begun.
Helaba specialist Ulrich Wortberg sees things similarly. “The expectation balance is at its lowest level since the financial crisis of 2008.” The Ukraine war, high inflation and further increases in key interest rates, which could have a dampening effect, had a negative effect.
“The economic prospects for the German economy are gloomy,” emphasized the analyst. According to chief economist Thomas Gitzel from VP Bank, German gross domestic product is likely to shrink in the current quarter. “So the recession has already begun, because no improvement is expected for the final quarter of 2022 either.” Even for the beginning of 2023, there is little reason to hope that the environment will brighten up again. “The recession is likely to become an economic companion over a longer period of time.”
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The gas surcharge planned for all consumers from October of 2.419 cents per kilowatt hour will further reduce their purchasing power. “The gas surcharge alone will cost private households more than they would benefit from the relief of ten billion euros planned by Finance Minister Christian Lindner,” explained Jörg Angele from the Bantleon fund company. In 2022 and 2023, households are only threatened with the withdrawal of around 70 billion euros each due to higher energy prices.
Due to the tense economic situation, the payment practices of companies in Germany are already deteriorating. “Many companies are currently struggling with significant cost increases that are affecting earnings and liquidity,” explained Creditreform chief economist Patrik-Ludwig Hantzsch on a study by the credit agency. In the first half of 2022, suppliers and lenders in business with other companies recorded an average payment delay of 10.5 days, after 9.9 days in the second half of 2021. The risk of payment defaults has recently increased significantly.
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