Looking forward, the German economy is expected to continue gaining momentum. Strong wage growth is anticipated to drive a gradual recovery in private consumption, and there are signs that the inventory cycle may start turning positive. However, recent data indicating a drop in new orders and high inventory levels suggest that any industrial activity rebound will be limited. Despite potential cyclical improvements, challenges still exist that could impact economic activity in Germany. Higher oil prices due to ongoing conflicts in the Middle East could negatively affect industry and exports. Additionally, a rise in insolvencies and announcements of job restructurings may lead to a weaker labor market and hinder a strong industrial rebound. Structural weaknesses within Germany will also play a role in shaping the pace of recovery.
Although there has been optimism in recent weeks, the official start of the second quarter for the German economy has been underwhelming. Private consumption remains subdued while industrial production struggles to gain traction. Once again, exports are driving growth. While it may be too early to dismiss optimism completely, it is evident that the German economy’s recovery will be challenging.
