Germany’s economy is showing signs of improvement, with the Bundesbank stating that the country’s output is set to grow in the second quarter. Despite facing challenges, there are increasing positive developments in various sectors, according to the central bank’s monthly bulletin.
Private consumption, which was subdued in the first quarter, is expected to pick up in the second quarter. Additionally, the industry is slowly overcoming its weak phase and making progress.
The outlook for Europe’s largest economy has improved since the beginning of the year, surpassing estimates in the first quarter. While analysts anticipate a gradual acceleration, recent data suggests a potential slowdown. Manufacturing sector figures for April were disappointing, signaling a weak start to the second quarter. Investor confidence also improved less than expected in June, according to the ZEW institute.
The Bundesbank’s latest forecasts predict a 0.3% increase in Germany’s real GDP for this year, with growth projected to accelerate to 1.1% in 2025 and 1.4% in 2026. Inflation is expected to experience fluctuations due to base effects, with price growth likely to rise towards the end of the year. Wage growth has been stronger than anticipated, impacting underlying price pressures.
The Ifo institute has also expressed optimism about Germany’s economic prospects, raising its growth forecast for this year to 0.4% and predicting a further acceleration to 1.5% in 2025. Timo Wollmershaeuser, head of economic research at Ifo, highlighted ‘new hope’ emerging in the economy, indicating a gradual recovery from the crisis.
Ifo anticipates a more favorable second half of 2024, with consumer activity normalizing, global trade and industrial production improving, and a gradual increase in investment supported by looser monetary policy. The institute expects two more interest-rate cuts by the European Central Bank following the recent reduction in June.
