FRANKFURT, May 24 (Reuters) – The German economy is expected to grow at a moderate pace in the second quarter as a recovery in industry more than offsets stagnant household consumption and a slump in construction, the Bundesbank said in a monthly economic report on Wednesday.
Europe’s largest economy stagnated in the first quarter, narrowly escaping a recession after output fell in the final three months of 2022 amid the aftermath of the Russian war in Ukraine and ongoing supply shortages.
Although a recovery has been underway for months, it has been slow and choppy, and the industry has suffered unexpected setbacks.
“Easing supply bottlenecks, the high order backlog and the fall in energy prices are supporting the further recovery in industry,” said the Bundesbank. “That should also support exports, especially since the global economy has picked up some speed again.”
However, private consumption is likely to stagnate as a rapid increase in nominal incomes will only prevent a further fall in real wages, the bank added.
Inflation has eaten away at purchasing power and the Bundesbank expects price growth to decline “only very gradually” over the coming months as input costs remain high and wage growth continues to fuel price pressures.
The tense situation on the labor market could get worse, even if the improvement is likely to be “rather slight”, according to the Bundesbank.
Construction could suffer a setback as demand falls and the supportive effect of mild weather earlier in the year wears off, the bank said.
Reporting by Balazs Koranyi. Editing by Christina Fincher
Our standards: The Thomson Reuters Trust Principles.
Comments are closed.