German Economy Faces Potential Contraction Amid Industrial Recession, Says Bundesbank
The Bundesbank warned of a possible shrinkage in the German economy in the current quarter, citing deep industrial recession, subdued investment, and cautious consumer behavior. This could have ripple effects on the broader Eurozone economy, especially as the industrial sector grapples with weak export demand and high energy costs.
Despite negative growth in two of the past three quarters, the central bank does not anticipate a severe and prolonged economic downturn at this time. Private consumption, although supported by rising real wages and ample savings, is expected to remain restrained.
Additionally, industrial production prospects are likely to deteriorate in the coming quarter, as short-term production plans and export expectations worsen. However, the labor market is expected to provide some stability, with overall employment levels remaining high and wages on the rise.
While there are concerning signs in some labor sectors, such as dampened employment plans and increased use of social insurance programs to avoid layoffs, the Bundesbank remains cautiously optimistic about the economy's resilience.