The Bundesbank addresses the worries regarding a stagnant economy, asserting that it is set for recovery.
Germany has whined about its struggling economy for quite some time now. However, Germany's Bundesbank takes a different perspective and sees signs that growth may be returning. Areas that have been hit hard lately could even accelerate this trend.
Bundesbank economists believe that the German economy has stabilized and is on track for further growth this spring. They stated, "It seems likely that economic output will increase marginally in the second quarter of 2024," in their monthly report.
In the first quarter, German GDP saw a 0.2% uptick compared to the previous one, after a 0.5% contraction at the end of 2023. The construction industry led the way, alongside manufacturing and likely service providers. Bundesbank's economists noted, "Service providers are likely to continue their recovery. This may even broaden and strengthen if private consumption also picks up steam."
Rising disposable income and wages
The Bundesbank suggests that rising real household incomes could encourage consumption, outweighing the current consumer uncertainty. They added, "Further increases in purchasing power are anticipated, with the labor market expected to remain strong and wages seeing significant rises."
Industry might see a moderate rebound as energy-intensive sectors recover. But for a sustained upturn in manufacturing, new orders would also need to improve. Currently, this has yet to materialize. Despite improved business expectations in the manufacturing sector, any significant increase in production is not expected until the latter half of the year.
Demand in construction remains weak, although an normalization following weather-related effects in prior quarters could dampen growth in the second quarter. Furthermore, a decline in sick leave could help support economic output. "In sum, the economy is likely moving a bit faster in its overall trend," predict the Bundesbank's experts.
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The Ifo Institute recently released economic forecasts, indicating a positive outlook for the German industry, with the construction sector expected to contribute significantly to the recovery. The Bundesbank's report also indicates that the resilient German labor market and rising wages should lead to increased disposable income, potentially boosting consumer spending. However, demand in the construction industry remains weak, with experts hoping for a normalization in the second quarter due to improved weather and reduced sick leave.
Source: www.ntv.de
