Germany is struggling with its dependence on Russian energy. The country is in the midst of an energy crisis that has caused inflation to soar.
Electricity prices in Germany went up more than 600% in the year to July due to soaring natural gas prices.
The producer price inflation, a leading indicator of consumer price inflation, rose to 37.2% in the year to July, the highest rise since 1949, according to official data.
The German economy did not grow in the second quarter of the year.
This is what's happening.
Russia has long been a supplier of oil and gas to Germany. At the height of the Cold War, the Soviet Union supplied energy to Germany.
Half of Germany's natural gas and a third of its oil come from Russia.
Russia invadedUkraine in February.
As diplomatic relations between Russia and the West soured, Moscow slashed its supply of natural gas to Germany to 20% of capacity, causing energy prices to soar.
Electricity prices have hit record highs on almost daily basis because of the EU's complex energy pricing system.
The chief Europe economist at Capital Economics told Insider that Germany is more vulnerable to higher gas prices than most European countries. It has a large industrial sector.
The country's large chemicals and metals sectors use a lot of natural gas and have seen their costs go up. The cost of manufacturingFertilizer in Germany more than doubled in the year to July
The water levels on the Rhine river have fallen due to the heat in Europe. Preliminary survey data shows that Germany's manufacturing sector contracted in June and July.
Like all eurozone economies, Germany is grappling with rising interest rates.
S&P economist Phil Smith said weakness in manufacturing was being compounded by a slowdown in the service sector with businesses reporting a growing strain on demand from high inflation and increased interest rates.
The German economy didn't grow in the second quarter.
The German economy is expected to contract in the fourth quarter of 2022, according to Capital Economics. How deep is the recession?
Inflation is expected to rise from 8.5% in July to 10%, the highest level since the early 1950s.
It's bad news for Europe that Germany's economy is slowing. Analysts say the chances of a full-blown economic and financial crisis rocking the eurozone are slim.
The European Central Bank is well-practiced in managing economic downturns through emergency measures.
The future is not as bright for Germany. Europe's industrial prowess is sputtering.
All Rights Reserved © 2024
