After the recession in 2023, the German economy is hoping for an improvement this year. But that is taking a while – for a number of reasons.
According to the Bundesbank, the German economy will continue to develop relatively weakly in the coming months. The expected slow economic recovery will be further delayed, according to the Bundesbank’s monthly report published on Tuesday. Due to disappointing exports, among other things, the central bank’s experts assume that economic output will only increase slightly.
The Bundesbank therefore continues to expect an economic slowdown, but does not expect a broad-based and long-lasting decline in economic output. However, this forecast only applies “as long as no new negative shocks occur,” the monthly report states. Private consumer spending and the services sector are likely to prove to be a pillar of the economy.
However, the Bundesbank experts also made it clear that consumers are “still feeling uncertain”. This means that the strong wage increases are still not leading to a vigorous revival of consumer spending.
In the coming months, however, industry will continue to weigh on general economic development. “Overall, the German industrial economy is likely to remain weak in the third quarter,” write the experts at the Bundesbank. However, the recent increase in incoming orders has at least provided a glimmer of hope.
Despite the comparatively weak economy, the Bundesbank does not expect a significant decline in inflation. Rather, the decline in inflation rates in the industrialized countries is continuing to progress only slowly. “There are no signs of a return to price stability targets in the near future,” it says. In labor-intensive services in particular, price increases remain stubbornly high, also due to “vigorous wage growth.”
Source: Stern
