
It is unlikely that the German economy will manage to escape the prolonged period of stagnation in the first quarter (Q1) this year, according to the country’s central bank.
The country’s economy remained listless in Q4 2024, the Deutsche Bundesbank noted.
The economy remained listless in Q4 2024, with the industry likely to have remained particularly weak and foreign orders remaining quite sluggish despite some recovery.
In early 2025, inflation is likely to be high, but is likely to come down in the coming months.
Based on an initial and early estimates released by the Federal Statistical Office, seasonally-adjusted real gross domestic product (GDP) declined by 0.1?per cent.
The industry is likely to have remained particularly weak, being under high pressure to adapt to changing structural conditions.
Foreign orders remained quite sluggish despite some degree of recovery. The ifo Institute’s business climate index deteriorated again.
Private consumption and the related services sectors are likely to have provided positive impetus. The steep rise in wages provided scope for additional consumer spending. However, consumers remained unsettled and this prevented a stronger recovery in consumption.
High financing costs, heightened economic policy uncertainty and the severe capacity underutilisation weighed on investment last year.
The reduced competitiveness of German industry and high competitive pressure, especially from China, were reflected in dwindling exports.
Households held back on spending despite sharply rising wages. As a result, their saving rate rose while private consumption increased only slightly.
Industrial output in Germany probably continued to head downwards in Q4 2024. In November, it rose month on month in seasonally-adjusted terms, but averaged over October and November, it was down somewhat compared with the previous quarter.
The production of consumer goods, in particular, declined, while capital goods production edged up somewhat.
The underlying trend dynamics of demand for German industrial goods stabilised somewhat. In November 2024, new orders in German industry were sharply down month on month in seasonally-adjusted terms owing to a decline in large orders. Averaged across October and November, there was also a marked decrease compared with the previous quarter.
Excluding large orders, however, there was a certain increase in orders both from Germany and abroad compared with the previous quarter. This meant that new orders from abroad continued the trend of recovery seen in the previous two quarters. However, this is unlikely to be enough to boost industrial activity perceptibly.
Total employment recently developed more favourably than expected in the December Forecast for Germany, despite job losses in the manufacturing sector.
Price developments at the upstream stages of the economy were uneven. Import prices were recently up very significantly compared with the previous month. This was the case for both energy and other goods.
The inflation rate was significantly higher again in December, partly due to a base effect.
In early 2025, inflation is likely to remain high initially. The inflation rate is likely to come down in the coming months. The recent very steep inflation for services will decline markedly, but it will still remain significantly above its longer-term average, the central bank observed.
Fibre2Fashion News Desk (DS)