The downturn in Germany’s economy is not yet over due mainly to weak demand in industry and construction, the Bundesbank reported on Monday.
“Real gross domestic product (GDP) in Germany is likely to decline slightly again in the fourth quarter of 2023,” the central bank wrote in its monthly assessment.
This would mark the second consecutive quarter of declininc economic output, meaning that Europe’s largest economy is in a “technical recession.”
According to the Bundesbank, the main cause of the renewed decline is the slump in industry and construction, where order backlogs are providing less and less cushion. Industrial production is also depressed due to the earlier rise in energy prices.
At the same time, the bank’s economists expect private consumption to slowly recover – also because wages are rising while the inflation rate is falling.
“The German economy is likely to expand slightly again at the beginning of next year,” the Bundesbank wrote, after forecasting on Friday that economic output will shrink by 0.1% for 2023 as a whole.
The Frankfurt-based bank reduced its estimate for growth in 2024 from 1.2% in the previous forecast from June to 0.4%.
In the medium term, the Bundesbank anticipates slightly stronger growth
