Weak phase in German economy; labour market robust: Central bank

According to the Federal Statistical Office’s flash estimate, economic output stagnated in the second quarter this year, after having contracted in the winter half-year (October 2022-March 2023). Weak foreign demand weighed on industry.

Employment will remain stable in the coming months, with unemployment continuing to rise slightly, the report said.

With inflation still high and the labour market remaining fairly tight, high wage settlements are expected in the coming months as well.

Averaged over April to June this year, consumer prices increased by a seasonally -adjusted 1 per cent compared with 0.9 per cent in the first quarter.

Looking at the year-on-year figures, the inflation rate fell from 8.8 per cent to 6.9 per cent in the second quarter this year.

In the coming months, inflation will, as things currently stand, probably come down further, mainly thanks to an increasingly dampening contribution from energy prices, the report noted. In addition, abating price pressures along supply chains and lapsing one-off effects are likely to play a part in lower inflation.

By contrast, wage growth will probably remain strong, even going into the new year. This is a key reason why the inflation rate is likely to stay above 2 per cent for longer. Higher inflation expectations and potentially recurring energy price shocks also pose upside risks to the price outlook, the report said.

Given stable employment and strong wage growth, as well as declining inflation, the recovery in private consumption is likely to continue. This will also give a boost to the services sector, it added.

Fibre2Fashion News Desk (DS)