Bundesbank predicts weak economic outlook for Germany in Q4

 

Admin I Tuesday, November 19, 2024

 

BERLIN – The German Bundesbank (Central Bank) damped any optimism about the country’s economic growth in its November monthly report, which was released on Tuesday.

Although preliminary data indicated that German gross domestic product (GPD) grew by a surprising 0.2% from July to September, the Bundesbank said there was little evidence of an improved underlying economy or a trend toward growth.

“The economic slump in the German economy is likely to continue in the fourth quarter,” according to the report.

Now that the wave of inflation has subsided and in view of rising wages, many consumers are feeling a little more relaxed again, the Bundesbank found, while higher government spending has saved Europe’s largest economy from a recession for the time being.

But according to the central bank, industry and construction will continue to dampen economic output. High financing costs for construction and the pronounced economic policy uncertainty will continue to weigh on investment and push down demand for construction services and capital goods, according to the report.

Although there are signs of a recovery in the export business, global demand for German-produced goods remains weak, according to the Bundesbank.

The report said that German industry is under great pressure to adapt to changing structural conditions, both at production sites in Germany and on the global markets.

According to the Bundesbank, people in Germany will have to prepare themselves for higher consumer prices into next year, as the central bank forecast inflation to be slightly higher for the time being.

In 2023, both energy prices and travel prices fell significantly towards the end of the year, bringing down inflation, but the bank said those dampening base effects will now no longer apply.

In October, official figures showed the inflation rate in Germany had already risen again to 2.0% after two months of falling values. The Bundesbank also noted that private health insurance premiums and the cost of public transport tickets are expected to rise at the start of 2025.

In addition, the central bank said that significant wage growth from 2024 will keep service prices high.