Consumer spending will only recover slowly. While income growth of private households is accelerating, because collectively agreed wages are being raised and inflation bonuses are being paid out, inflation is likely to remain stubbornly high in the months ahead. Real wages are therefore unlikely to rise until the second half of the year. Even though sentiment among consumer-related service providers and retailers was improving until recently, for the majority of them it is still negative, ifo Institute said in a press release.
Timo Wollmershauser, head of forecasts at ifo, said: “The German economy is divided at the start of the year. On the one hand, manufacturers are benefiting from easing supply bottlenecks as well as lower energy prices, and they are now on course for growth. On the other hand, high inflation is eroding the purchasing power of private households and causing consumption to shrink.”
ALCHEMPro News Desk (NB)
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