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ECONOMY

Industrial output decline slowed in February

German industrial output fell 2.9 percent in February from January, the economy ministry said Thursday, as demand for goods from Europe's largest economy dried up amid the global recession.

Industrial output decline slowed in February
Photo: DPA

While the drop was still sharp, it was less intense than analysts had expected and represented a considerable improvement from the stunning 6.1 percent decline last month.

Economists had forecast a 3.4 percent drop in February and some analysts took the latest data as a sign that the worst could be over for Germany’s embattled industrial sector.

Martin Lueck from Swiss banking giant UBS said that it was “another very poor number, but less ugly” than the figures reported the previous month, which were the worst output data since German reunification in 1990.

“This data, albeit still incredibly poor, raises further hope that we may indeed be close to the bottom,” he said.

For its part, the ministry said the outlook for German industry was not bright.

“Given the still falling industrial orders, output will remain weak in the coming months,” the ministry said in a statement.

Data released Wednesday showed that industrial orders in Germany fell 3.5 percent in February from the January level.

Jennifer MacKeown from Capital Economics was less upbeat.

The figures “confirm that the sector is still in dire straits,” she said.

“The latest data clearly suggest that the recession is still in full swing,” she added, saying her forecast of a four percent fall in German gross domestic product (GDP) in 2009 looked increasingly over-optimistic.

Germany is facing its worst recession in over six decades, with the Organisation for Economic Cooperation and Development (OECD) predicting GDP in the world’s largest exporter will slump by more than five percent this year.

ECONOMY

Swedish economy to grind to a halt as interest rates kick in

Sweden faces an economic slump next year that will see economic growth grind to a complete stop, Sweden's official government economics forecaster, has warned.

Swedish economy to grind to a halt as interest rates kick in

Sweden’s National Institute of Economic Research, which is tasked with tracking the business cycle for the Swedish government, warned in its quarterly forecast on Wednesday that greater than expected energy prices, interest rate rises, and stubborn inflation rates, Sweden was facing a significant downturn. 

The institute has shaved 1.6 percentage points off its forecast for growth in 2023, leaving the economy at a standstill, contracting -0.1 percent over the year. 

The institute now expects unemployment of 7.7 percent in 2023, up from a forecast of 7.5 percent given when in its last forecast in June.

“We can see that households are already starting to reign in their consumption,” said Ylva Hedén Westerdahl, the institute’s head of forecasting, saying this was happening “a little earlier than we had thought”. 

“We thought this would have happened when electricity bills went up, and interest rates went up a little more,” she continued. 

The bank expects household consumption to contract in 2023, something that she said was “quite unusual” and had not happened since Sweden’s 1990s economic crisis, apart from in the immediate aftermath of the Covid-19 pandemic. 

This was partly down to a five percent reduction in real salaries in Sweden in 2022, taking into account inflation, which the institute expects to be followed by a further two percent fall in real salaries in 2023. 

If the incoming Moderate-led government goes ahead with plans to reimburse consumers for high power prices, however, this would counterbalance the impact of inflation, leaving Swedish households’ purchasing power unchanged. 

The institute said it expected inflation to average 7.7 percent this year and 4.6 percent in 2023, both higher than it had forecast earlier.

Sweden’s Riksbank central bank this month hike its key interest rate by a full percentage point, after inflation hit 9 percent in August, the biggest single hike since the 1990s. 

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