The German Bundesbank has stated in its monthly economic report that the country’s economy is projected to experience modest growth in the second quarter, despite weak household consumption and a decline in construction. The economy stagnated in the first quarter, narrowly avoiding recession, due to dwindling production in the final months of 2022, following the conflict in Ukraine and supply bottlenecks. The recovery has been ongoing in recent months, however it has been slow and erratic. Deutsche Bundesbank stated that the ease of supply bottlenecks, a sizeable order backlog, and plummeting energy costs have aided in the industry’s consistent rebound, which should strengthen exports, especially since the global economy is experiencing some momentum. Nonetheless, a sharp increase in nominal income will do little to prevent further declines in real wages, resulting in stagnant private consumption.
Deutsche Bundesbank also claims that the rising price inflation will only slightly decline as input costs remain high and increasing wages keep adding to the price pressure. While a tight labor market could further tighten, the bank predicts that improvements will be minimal. Finally, the construction sector may suffer as the early-year boost from lower demand and mild weather wears off.