Europe’s largest economy could gradually start to pick up again. At least the start of the year gives hope.
The German economy has regained some momentum at the start of the year. Supported by exports and increased construction investments, gross domestic product (GDP) grew slightly by 0.2 percent in the first quarter compared to the previous quarter, adjusted for price, seasonal and calendar effects, according to the Federal Statistical Office in Wiesbaden. The authority thus confirmed preliminary figures. According to the German Federal Bank, economic output should also increase slightly in the second quarter. However, economists do not expect the German economy to make any major leaps this year.
“After GDP declined at the end of 2023, the German economy started 2024 with a positive sign,” explained the President of the Federal Statistical Office, Ruth Brand. According to the information, growth in the first three months of the current year was driven by increased construction investments – thanks to mild weather – and an increase in exports. Private consumer spending, on the other hand, fell.
Hopes for the coming months are mainly based on a rise in private consumption in view of increased wages and weaker inflation. Lower inflation rates can stimulate the desire to consume. Based on a survey of 9,600 participants, the Institute for Macroeconomics and Business Cycle Research (IMK) of the trade union Hans Böckler Foundation recently identified indications of an “impending turnaround in consumption” – especially “if the inflation rate continues to fall over the course of the year and, with rising nominal wages, real wages also rise again after several years of decline.”
After recession, only slight growth expected in 2024
However, economists are not expecting a strong upturn for the year as a whole. The “economic experts” are only expecting a 0.2 percent increase in gross domestic product. The development of the German economy will be characterized by weak overall economic demand, the German Council of Economic Experts recently announced. The federal government is somewhat more optimistic, with an expected economic growth of 0.3 percent.
Last year, Germany slipped into a slight recession with a price-adjusted decline of 0.2 percent. Europe’s largest economy felt the effects of the global economic slowdown, as well as the temporarily high energy prices and the rapidly rising interest rates. There is also a shortage of skilled workers and companies complain about too much bureaucracy.
Source: Stern
