(Bloomberg) --

Germany’s leading research institutes cut their joint 2021 growth forecast for Europe’s biggest economy as supply logjams delay the nation’s recovery.

The downgrade to a 2.4% expansion in gross domestic product, from 3.7% previously, reflects a relentless shortage of inputs, a lack of shipping capacity and -- more recently -- a spike in energy costs that is threatening rebounds across the globe. The outlook for 2022 was upgraded to 4.8% from 3.9%.

“Supply bottlenecks for intermediate products are hampering production in the manufacturing sector -- as a result, only the consumer-related service industries are growing,” the institutes said in a joint press release on Thursday.

Germany has struggled to keep up momentum this year, with its manufacturing-heavy economy particularly exposed to supply disruptions. Gauges of business and investor confidence have been on a steady decline in recent months, and company surveys suggest weakness is spilling into services as consumers turn wary of quickly rising prices.

The institutes said they expect service-sector activity “will remain below the usual level during the cold season, even with low levels of infection.” The twice-yearly outlook is prepared for the economy ministry by the DIW, Ifo, IfW, IWH and RWI institutes, and helps guide the government’s own forecasts and budget planning.

In a separate report, the German government predicted a “sideways” development for the economy in the fourth quarter.

“Industrial output fell sharply in August and industrial activity is likely to remain subdued in the months to come,” the Economy Ministry said in its monthly report, adding that its outlook for the sector remains “cautiously optimistic.”

The ministry said the inflation rate should slow noticeably in early 2022 after special effects boosted prices in recent months.

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