Anticipated return to economic growth believed to be imminent towards year-end.
The German economy isn't anticipated to bounce back instantly, according to the German government. As per the monthly report from the Federal Ministry of Economics, "an economic upswing might only happen towards the end of the year." Decreasing order backlogs and a trend towards even weaker new business orders have negatively impacted the export-reliant industry. The state of consumption-focused sectors like retail, transport, and hospitality is also expected to remain unfavorable.
Inflation has decreased and there's been a significant increase in purchasing power, but consumer confidence has taken a dip. The European Football Championship didn't seem to influence consumer spending in a significant way, as pointed out, referring to the tournament held in Germany from June 14 to July 14.
The weak economy is increasingly impacting the labor market, emphasized by the ministry, led by Minister Robert Habeck. "The leading indicators don't suggest an immediate turnaround, so there's currently no indication of a labor market recovery in the second half of the year." Even substantial real wage increases aren't improving consumer sentiment due to rising job insecurity concerns.
Germany's GDP, Europe's largest economy, contracted by 0.1% in the spring. It had still grown by 0.2% in the first quarter. Major institutions have revised their economic forecasts downwards in their autumn projections.
For instance, the Kiel Institute for the World Economy (IfW) now predicts Germany's GDP to shrink by 0.1% this year. They had anticipated a growth of 0.2% in June. For the next year, the IfW has drastically reduced its forecast - from 1.1 to 0.5%.
The economic upswing, as mentioned in the Federal Ministry of Economics' report, is expected to occur towards the end of the year, marking the end of the year with some positive economic changes. Despite the decreased inflation and increased purchasing power, consumer confidence has remained low, hinting at challenges even towards the end of the year.
