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Like oversized percentage signs: wound steel at Salzgitter AG

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After stagnation at the beginning of the year, the Bundesbank expects economic growth in Germany to resume in the spring. However, according to economists, the outlook for the economy is increasingly deteriorating.

"Economic output is likely to rise slightly again in the second quarter of 2023," the Bundesbank writes in its new Monthly Report. "Easing supply bottlenecks, the high order backlog and lower energy prices are favoring the continuation of the recovery in industry." This should also support exports.

However, economists do not expect any major leaps – also in view of the latest figures from the Munich-based Ifo Institute. For the first time in six months, the mood in the economy has deteriorated again: The Ifo business climate fell by 1.7 points to 91.7 points compared to the previous month. The companies surveyed are much more pessimistic about the outlook than in the previous month.

»Decline is not an outlier«

"The significant decline in the Ifo business climate is not an outlier. This is because other important leading indicators, such as the purchasing managers' index for industry or incoming orders, have been pointing clearly downwards for some time," said Commerzbank Chief Economist Jörg Krämer. He thinks a technical recession in the second half of the year is more likely than a recovery. VP Bank Chief Economist Thomas Gitzel also expects the German economy to shrink in the second half of the year: "The still high inflation rates and the significant rise in interest rates will only have to show their effects."

The Bundesbank expects little stimulus this quarter from private consumption, which already failed to support the economy in the first three months of the year in view of inflation. "Real net incomes of private households should at least not fall further due to strong wage increases despite continued high inflation. Private consumption is therefore likely to stagnate," write the Bundesbank's economists.

Comparatively high inflation is eating away at consumers' purchasing power. You can buy less per euro. In view of the high price increases, for example for food, it is to be expected that the inflation rate will only decline very gradually, the Bundesbank predicts.

According to preliminary data from the Federal Statistical Office, gross domestic product in Germany stagnated in the first quarter compared to the previous quarter. Europe's largest economy thus narrowly avoided a winter recession. At the end of 2022, economic output had fallen by 0.5 percent.

mamk/dpa-AFX