Will Germany experience another poor quarter?

Concerns regarding Germany’s recovery, which is anticipated to be challenging, are growing. Due to a combination of rising interest rates, weak global orders, and high energy costs, Germany’s economy has been among the weakest in Europe this year.

Given a combination of rising interest rates, weak global orders, and high energy costs, Germany’s economy has been among the weakest in Europe this year.

The Bundesbank stated in a monthly economic report today that although there are some indications that an improvement may occur early next year, Germany’s economy will probably contract again this quarter and that its recovery will be difficult.

Germany has experienced a severe industrial recession this year, ranking among the continent’s weakest economies due to a combination of rising interest rates, low global demand, and high energy costs.

In the fourth quarter of 2023, the largest economy in the 20-nation currency bloc, the German Bundesbank, predicted that economic output would fall slightly once more.
“The German economy is set to recover only arduously from the period of weakness that has persisted since the outbreak of war against Ukraine,” it added.

Only once this year did Germany’s economy grow on a quarterly basis, and the last three months of the year saw a majority of unexpected negative developments.

Despite this caution, the central bank expressed optimism for the upcoming year, citing high employment, robust wage growth, and stabilizing sentiment indicators.

“Tentative signs of a slight improvement after the turn of the year are beginning to emerge,” the Bundesbank said.

“The underlying trend in new orders suggests that foreign demand may have bottomed out,” it stated.

However, it also issued a warning, noting that surveys indicate a decline in new orders and generally weak demand, and that there is no proof of a sustained improvement in global industrial activity. The bank also noted that the order books of German companies are gradually being reduced, which may also be a drag on output.

Rather, the boost will come from households; while they may be cautious with their money at first, rising net incomes will eventually trigger real consumption.