Persisting Economic Lethargy persists in Germany during the summer period.
Germany's economic slump persists throughout the last summer quarter, as per the Bundesbank. As stated in their monthly report released on Thursday, "Germany's economy is still grappling with tough conditions." There's a possibility that GDP might stay the same or even slightly drop between July and September, following a 0.1% decline during the spring. Consecutive quarters of negative growth would theoretically lead to a recession. However, the Bundesbank insists that a major, extensive, and prolonged economic slump isn't currently anticipated.
The bank pointed out several factors contributing to this persistent slowdown. "Economic policy uncertainty is having a negative impact on businesses' investment decisions," they noted. Besides, "ever-increasing financing costs are diminishing interest in investment goods and construction services."
Although there are hints of a slight upgrade in overseas orders, "this hasn't been substantial enough to reduce the overall industry's backlog." Spitefully great wage growth and cheaper prices, private consumption remains lethargic. Indicators like consumer sentiment and new car registrations suggest that consumers are continuing to be cautious with their spending.
The Bundesbank isn't yet giving the green light on inflation. Although August saw an unexpected drop in the inflation rate, as per European standards, to 2%, they predict higher figures in the coming months. In September, the inflation rate is expected to remain low, but it'll then start to climb back up. "Starting from October, energy prices, which plummeted significantly during the fall of last year, will boost the year-on-year rate on their own," the monthly report states. Moreover, the primary price surge is unlikely to decrease significantly due to the substantial wage increases starting from a high base.
The Bundesbank expressed concerns about economic policy uncertainty affecting businesses' investment decisions in Germany. Despite the Bundesbank not anticipating a major economic slump at the moment, they warned of ever-increasing financing costs impacting investment goods and construction services.
