The President of the German Institute for Economic Research (DIW), Marcel Fratzscher, sees Germany facing a long dry spell in view of rapidly rising prices and a collapse in consumer spending. The “price shock” is causing a permanent loss of prosperity in large parts of the population, Fratzscher said mirror. The bottom 40 percent of society is particularly affected, who spend almost their entire income on their livelihood and hardly save anything. “You will consume everything that is not absolutely essential in the future much more hesitantly or not at all,” said the economist.
The Germans are currently keeping their money together like they haven’t in a long time. The Federal Statistical Office reported the largest decline in retail sales for July since 1994. Fratzscher fears a downward spiral: “High inflation depresses customers’ willingness to buy, which means that companies have less money to invest. That could start a downward spiral with one for a or two years of weak economic performance.” According to the DIW President, if people with low incomes spent less, that would be much more significant for the economy as a whole than if the top ten percent saved.