The state of the German economy has slightly improved in the first months of 2024, reflecting increased industrial production and a surge in the construction sector due to a mild winter, reported the central bank.
– Real Gross Domestic Product (GDP) is likely to have increased slightly in the first quarter – states the Bundesbank in its monthly report published on Thursday.
Experts had previously predicted a slight decline. In the last quarter of 2023, the German GDP decreased by 0.3 percent compared to the previous three months.
– The estimate (of mild growth – ed. note) is supported by somewhat higher industrial production recently, relying, among other things, on increased exports. Additionally, there has been an unusually strong growth in production in the construction sector due to exceptionally high temperatures in February – explains the Bundesbank.
However, the extension of growth activity into the second quarter is not guaranteed, the central bank emphasizes, warning that the economy remains fundamentally weak and continues to be hindered by elevated financing costs and ‘increased uncertainty in economic policy’.
Industrial production remains weak in many sectors, and demand in residential construction continues to weaken, they note. A significant boost in personal consumption is not expected either, as households remain reluctant to spend, despite easing inflation and higher wages.
The Bundesbank expects a decline in the inflation rate in April, but it could return to around three percent in May, reflecting a lower comparative base in the same month last year when authorities offered citizens cheap tickets for urban and suburban transport.
Additionally, the recent rise in oil prices and the continuous strong growth in wages could further stimulate price increases, they add, noting at the Bundesbank.
