Looking ahead, the German economy is expected to gain momentum driven by strong wage growth and a cautious recovery in private consumption. There is also anticipation that the inventory cycle will gradually turn positive, however, this has not happened yet. Recent data showing a drop in new orders and high inventories indicate that any rebound in industrial activity will be subdued.
Despite potential cyclical improvements, challenges remain that could hinder economic activity in Germany. Higher oil prices due to ongoing military conflicts in the Middle East could impact industry and exports. The rising number of insolvencies and announcements of job restructurings also pose a risk to the labor market and industrial rebound. Additionally, structural weaknesses in Germany will continue to limit the pace of any economic recovery.
While there has been optimism in recent weeks, the official start of the second quarter for the German economy has been disappointing. Weakness in private consumption and sluggish industrial production are evident, with exports remaining the main growth driver. It’s too early to abandon optimism completely, but it is apparent that the recovery in the German economy will face challenges and may take time to fully materialize.