Wachstumskurve mit Kugelschreiber symbolisiert die wirtschaftliche Lage.

© iStock.com/blackred

  • The persistently high energy prices, rising inflation and the related losses of purchasing power are increasingly impacting economic development in Germany.

  • According to the latest official figures, the third quarter was better than expected, and the German economy did grow. Going forward, however, the Federal Government expects economic output to decline in the 2022-23 winter half-year, meaning that annualised GDP growth will probably be slightly negative in 2023.

  • Industry has successfully managed to cut back substantially on its gas consumption this year. A large proportion of these reductions is due to improved efficiency and to substitution with alternative energy sources. The main falls in industrial output were in the energy-intensive sectors. The gas reservoirs are more than 99% full (at the beginning of November).

  • Industrial output increased again at the end of the third quarter. The outlook for the coming months is however dampened by a clear drop in demand and poor business sentiment.

  • Retail turnover picked up again in September, even though sales at filling stations slumped following the end of the tax break on fuel. Consumer sentiment remains very down-hearted.

  • The inflation rate rose further to 10.4% in October, the highest level since December 1951. This was despite the fact that the cut in VAT on gas deliveries and district heating from 19% to 7% must have reduced the rate.

  • The labour market remained robust in October, but is showing signs of the less favourable economic outlook. In view of the shortages on the labour market, companies are trying to retain their employees.

  • From January to August 2022, German district courts reported a total of 9,414 corporate insolvencies filed, roughly 2% fewer than in the same period in 2021. Current leading indicators and surveys are suggestive of rising insolvency cases, but a “wave of insolvencies” is not in sight.


The persistently high energy prices, rising inflation and the related losses of purchasing power are continuing to impact Germany’s economic outlook. Surveys suggest that both business expectations and consumer sentiment remain at record lows. But there are also various successes to report: for example, the industrial sector has managed to cut its gas consumption by more than 20% since the beginning of the year and to become more independent of Russian gas. A large proportion of these savings are due to improved efficiency, since economic output is holding up comparatively well. Also, companies have been able to substitute some of their gas consumption with alternative energy sources. The gas reservoirs have been more than 99% full since the beginning of November. Furthermore, according to preliminary data from the Federal Statistical Office of 28 October, the economy grew – contrary to expectations – by a price-adjusted +0.3% in the third quarter compared with the preceding quarter.

Nevertheless, the outlook is very overcast. Overall industrial output is currently stable, and grew by 0.7% in September. But the energy-intensive areas of the manufacturing sector have registered clear declines since the beginning of the year – and are around 10% down from the level at the beginning of the year. Also, new orders continued to fall sharply in September ( 4.0%), thus indicating a continuing downturn in demand. The outlook for foreign trade remains pessimistic: in September, both exports and imports were down. The year-on-year rise in consumer prices reached a new high of +10.4% in October. This is the highest level for more than 70 years.

All in all, this confirms the picture painted in the autumn projection of 12 October, according to which economic output will probably record growth of 1.4% this year, primarily due to the positive development in the first three quarters. The German economy is then likely to slide into a recession in the 2022-23 winter half-year. For 2023, the Federal Government is therefore expecting an annualised drop in economic output of 0.4% in year-on-year terms.


The latest indicators show a generally robust development in the global environment. Global industrial output improved slightly between July and August, at +0.5%, and world trade also picked up somewhat, by +0.7%. The latest indicators of sentiment also signal a stabilising of the global economic situation at a low level. The S&P Global index (formerly IHS Markit) remained below the 50-point growth threshold in September, although it increased slightly compared with the previous month. Growth in the services sector offset a decline in the manufacturing sector. The survey respondents do however anticipate a difficult global economic environment in the coming months.


Both the nominal imports and the nominal exports of goods and services were down from the preceding month’s level in September at 2.6% and 0.3% respectively (seasonally adjusted). The drop in the nominal figures is primarily due to the sharp fall in prices for imports and exports (-0.9% and -0.6% respectively against the preceding month). This means that the decline is likely to have been much smaller in real terms. As a result of the sharp drop in prices for imported fuels, and gas in particular, the terms of trade have improved. For example, the trade surplus improved significantly in September, standing at +€2.6 billion (August: -€1.3 billion). However, it remains at a very low level, primarily due to the energy price crisis; in September 2021, it was almost ten times as high, at +€12.0 billion.

The outlook for foreign trade remains pessimistic, but has improved slightly. ifo export expectations rose slightly in October, at -5.3 balance points, but are still at a level comparable to that of spring 2020. The recovery from the supply bottlenecks continued in October following the set-back in September. According to the ifo survey, 64% of companies were still reporting shortages in procurement in October. The end of congestion outside key ports and falling container freight rates will probably have improved the situation.


Output in the goods-producing sector rose by 0.6% between August and September. While output in industry increased by 0.7%, there was a 0.3% decline in construction. The energy sector recorded growth of 1.7%.

Economic development in the individual industrial sectors varied: the large sector of vehicles and vehicle parts registered a strong increase of 9.3% over the preceding month. Pharmaceuticals (+10.9%), coke and refined petroleum products (+10.5%), data processing equipment, electrical and optical products (+3.8%), paper and cardboard (+1.2%) and metal products (+0.9%) also recorded growth. Other sectors, however, such as the energy-intensive chemical products (-2.9%), glass, glassware and ceramics (-1.3%), and also mechanical engineering (-1.7%) registered production falls.

New orders saw a month-on-month decline of 4.0% in September. They had already fallen by 2.0% in August. Overall, according to recent figures, orders stood at 10.8% below the preceding year’s level. The month-on-month decline was due to a slump in foreign demand: while domestic orders were still slightly up, orders from abroad fell by 6.3% in the non-euro zone and by as much as 8.0% in the euro zone. At sector level, sharp declines in the two largest industrial sectors, automotive (-9.0%) and mechanical engineering (-8.1%), impacted the overall index. The high level of new orders that came from pent-up demand after the coronavirus pandemic appears to have come to an end. The number of new orders is now back at the same level as before the pandemic.

The industrial outlook in the coming months is poor, even if industrial output did increase again at the end of the third quarter and it actually grew by an impressive 0.5% from the second quarter. But demand is declining noticeably and business confidence continues to be low.


Retail turnover (excluding vehicles) rose by 0.9% in September compared with the previous month. Here, it should be noted that the turnover of fuelling stations saw the greatest fall since records began, of 15.7%. The discount on fuel ended at the end of August, and the consumers had clearly stocked up in advance of this. In comparison with September 2021, the retail trade reported a (real) fall in turnover of 0.9%, largely due to the high price rises in the shops. In nominal terms – i.e. unadjusted for prices – turnover increased by 9.9% over the year. Food retailing recorded a month-on-month increase of 2.6% in September in real terms (-2.4% down on the same month the year before). Trade in textiles, clothing, shoes and leather goods registered an increase of 9.9% (+11.8% on the same month the year before). E-commerce and mail order services experienced a rise of 5.8% (1.0% down on the same month the year before). The number of new registrations of passenger cars by private owners fell by 5.3% in October, but this was following on from increases, some of them substantial, in the five previous months.

According to the GfK survey, the downturn in consumer sentiment has come to a halt. A slight improvement is predicted for November, but the consumer climate still stands at an extremely low level. The ifo figures for business expectations in the retail sector dipped again in October. The balance of the figures reported remains at a very low level. The assessment of the current business situation in the retail trade is however, according to ifo, comparatively stable, and recently actually improved to some extent.


The rate of inflation, i.e. the rise in the consumer price level within the space of a year, rose again in October to 10.4%. This is its highest level since December 1951. Back then, high inflation rates were caused by scarcity in the supply of goods shortly after the currency reform. The rate in October 2022 rose by 0.4 percentage points compared with the previous month (September: +10.0%). The core inflation rate (excluding foodstuffs and energy) stood at +5.0% (September: +4.6%), and was again at less than half of the overall rate, but at a record level since December 1993.

The rise in prices of fuel was again very steep (+43.0%; September: 43.9%). The rise in food prices hit a new post-reunification record at +20.3% (September: +18.7%). Here in particular, upstream prices increases put upward pressure on prices. In September, producer prices rose by +45.8% in year-on-year terms, equalling the rate seen in the preceding month, which was itself already the highest rate since the survey was started in 1949. Import prices rose by +29.8% in September in year-on-year terms, but fell slightly from the preceding month’s level (-0.9%). The increase in wholesale selling prices was again greater in September (compared with September 2021: +19.9%; compared with August 2022: +1.6%).

This was despite the fact that the cut in VAT on gas deliveries and district heating from 19% to 7% in the third relief package must have reduced the inflation rate. Nevertheless, prices rose significantly compared with the same month a year earlier (gas: +109.8%; district heating: +35.6%). High inflation rates are also expected in the coming months. The Federal Government’s autumn projection from mid-October anticipates a rise of 8.0% for the annual average in 2022. Thanks to the brakes on gas and electricity prices, 2023 is expected to see a drop in the rate (+7.0%). This assessment is shared by the Council of Economic Experts in its latest annual report (+8.0% and +7.4% respectively).


The labour market remained robust in October, but is showing signs of the poor economic outlook. For example, the usual pick-up in the autumn is weaker than usual. Overall, the number of employees was steady. The rise in unemployment rates subsided further, standing at 8,000 people in October. The migration of people fleeing Ukraine no longer increased the figures, but is now visible in the figure for underemployment, which includes people participating in language courses and other measures. The number of people in underemployment in October was 29,000 higher than in September. Gainful employment stagnated at a record level in September, with the August figure being revised upwards (+12,000 people). The initial report had spoken of a decline. Employment in jobs subject to social security contributions was up significantly in August (+31,000 people). The number of people on short-time work stood at around 0.1 million in August, pointing slightly upwards. There are signs that the numbers will continue their slight rise. In terms of economic sectors, the particularly energy-intensive sectors are not affected so far. The leading indicators have continued to worsen, and suggest that the rise in employment will cool off. In general, however, in view of the shortages on the labour market, companies are trying to retain their employees.


The downward trend in corporate insolvencies over the past two years continues, while the figures reported so far in 2022 remain below the previous year’s level. Following final figures from the Federal Statistical Office, German local courts reported a total of 9,414 applications for corporate insolvency from January to August 2022, 2.3% down on the same period in the previous year.
As an early indicator, the number of regular insolvencies filed gives an indication of the future development of corporate insolvencies. Following a clear drop in regular insolvencies of 20.6% between August and September, the figure for October bounced back, with an 18.4% increase in applications. Experts at the German Economic Institute (IW) in Halle expect the number of insolvencies to rise in the coming months; a “wave of insolvencies”, however, is not currently expected. Nevertheless, the implications of the war in Ukraine and the sharp rise in energy prices are a major burden for many companies, and it is difficult to assess its impact in terms of future insolvencies in the coming months.


[1] This report is based on data that were available as of 11 November 2022. Unless stated otherwise, these are rates of change against the respective preceding period on the basis of price-adjusted figures which have also been adjusted for calendar-day and seasonal variations.