According to the Bundesbank, the prospects for the German economy have improved and it expects further growth in the spring. “Economic output is likely to increase slightly again in the second quarter of 2024,” wrote the economists at the German central bank in their monthly report. Gross domestic product (GDP) rose by 0.2 percent from January to March compared to the previous quarter, after shrinking by 0.5 percent at the end of 2023.
Construction in particular, but also industry and probably also service providers, grew in the first quarter. “Service providers are likely to continue their recovery. This could even broaden and strengthen if private consumption also provides the first impetus.” The Bundesbank believes that this is what the Ifo Institute’s survey results for the consumer-related service sectors indicate. The rising real disposable household incomes are therefore likely to reduce consumer uncertainty: “Further gains in purchasing power are to be expected, as the labor market is likely to remain robust and wages will continue to rise strongly.”
According to the Bundesbank economists, the energy-intensive sectors of industry could recover moderately. However, in order to give industry a stable boost, the volume of new orders must also grow again across the board. This has not yet happened. The brighter business expectations in the manufacturing sector will therefore probably only be reflected in noticeably more momentum in production from the second half of the year. Demand in construction is also still very weak and there are no signs of a major recovery. A further decline in sick leave could, however, support economic output again: “Overall, the economy is gradually gaining some momentum in terms of basic trends,” conclude the Bundesbank experts.