The economy Weakness in the German economy continues
An economic upturn in Germany is not in sight for the time being. There are several reasons for this. Nevertheless, the Bundesbank offers some hope.
22.01.2025, 12:06
SDA
According to the Bundesbank, the weak phase of the German economy will continue into the current year. "Even in the first quarter of 2025, the German economy is unlikely to succeed in freeing itself from the prolonged stagnation phase," states the central bank's January monthly report.
According to preliminary calculations by the Federal Statistical Office, German economic output shrank by 0.2% last year. This made 2024 the second year of recession in a row for Europe's largest economy. In an initial estimate for the final quarter of 2024, the statisticians assume that gross domestic product (GDP) fell by 0.1% compared to the previous quarter.
Weak industry - hopes for private consumption
"The German economy remained weak in the fourth quarter of 2024," states the Bundesbank. "Industry is likely to have performed particularly weakly once again." Orders from abroad remained subdued despite a certain recovery, and the construction sector is unlikely to have provided much impetus for growth.
Private consumption, on the other hand, should have recovered somewhat, as higher wages gave people more scope for spending. "However, consumer uncertainty persisted and counteracted a stronger recovery in consumer spending," the Bundesbank concludes.
Inflation remains high for the time being
The fact that life in Germany has recently become more expensive again could also have a dampening effect: In December, consumer prices were 2.6 percent higher than in the same month last year - the second-highest inflation rate in the past year.
There is no rapid easing of inflation in sight: "Inflation is likely to remain high for the time being at the beginning of the year," predicts the Bundesbank. The rise in the price of CO2 for petrol, heating oil and gas as well as the increase in the price of the Deutschlandticket are likely to drive inflation at the beginning of the new year.
Nevertheless, the economists at the Bundesbank offer some hope: "The inflation rate is likely to ease again in the following months. The recent very strong increase in the price of services will fall noticeably. However, it will still remain well above its longer-term average." In December, prices for services such as insurance, airline tickets and restaurant meals in Germany were 4.1 percent higher than in the same month last year.
