According to the Bundesbank, the economy is recovering more slowly than anticipated
The German economy recovered less than expected in the spring, according to the Bundesbank's assessment. "Real gross domestic product (GDP) may have only slightly increased in the second quarter", it says in the latest monthly report of the Bundesbank.
Experts referred to a disappointing development in industrial companies from April to June. Data from May had given hopes for a quick improvement in the industrial business cycle, but:
The Bundesbank assumes that a rather weak development in industry and construction was the main brake on the economy in the second quarter. A cause was the higher interest rates: "Rising financing costs continued to pressure investments and, in turn, domestic demand for industrial goods and construction services."
However, the Bundesbank expects a somewhat better economic development in the third quarter. The central bank referred to private consumption, which should pick up speed in the summer months. "This could be contributed to, among other things, by the favorable framework conditions from strong wage increases, declining inflation, and a robust labor market."
However, industry is still expected to hold back the economy. The latest indicator of orders in industrial companies points to the fact that the demand weakness has not yet been completely overcome. "Therefore, GDP growth from today's perspective could also be a little below the expectations of the Bundesbank's Germany forecast from June."
Despite the Bundesbank's expectation of improved economic conditions in the third quarter, the Federal Bank remains concerned about the impact of industry on overall growth. The persistently weak demand in the industrial sector, as indicated by the latest orders data, suggests that GDP growth might still fall short of the Bundesbank's projections, potentially being influenced by the ongoing pressure on investments due to rising financing costs.
