FRANKFURT (Reuters – German’s economic boom is over, as a shortage in goods and labour along with new restrictions against the coronavirus virus pandemic have stalled the economy.

Also, the Bundesbank warned that inflation in Europe’s largest economy would likely stay above 3% for a while and that wage negotiations will deliver substantial increases.

The reopening of services meant that Germany’s economy boomed during the first half. However, it is now slowing down as the industry suffered from supply disruptions and because builders find it harder to hire workers.

The global economy could see this as a warning sign, given Germany’s vital role in global supply chains and Europe’s growing engine.

In its monthly report, the Bundesbank stated that “the economic recovery will likely take some breather.” From today’s perspective, GDP could be in decline by the autumn quarter 2021.

According to the Bundesbank, inflation in Germany may be just under 6% in this month. Next year will see a decrease due to a 2020 VAT reduction and other temporary factors that are not included in the calculation.

However, consumer prices grew by more than 3% in Germany, while core inflation (which excludes food and energy) was much higher than 2%.

Wage talks did not yield any significant increases this summer. However, real earnings increased as those who were affected by the pandemic saw their work hours cut could see an increase.

Also, new contracts came with higher wages.

The Bundesbank stated that macroeconomic conditions indicate stronger wage rises for collective bargaining agreements.

The ECB stated that current high inflation should be treated as a temporary phenomenon and not as a reason to tighten its ultra-loose monetary policies, which include a subzero rate of interest on bank deposits and large bond purchases.

Jens Weidmann, the Bundesbank’s former President, rebutted Friday’s official line of the ECB by warning about higher inflation expectations as well as wage growth.