Bundesbank expects German economy grew in Q2

BERLIN — The Bundesbank said on Wednesday it expected the German economy to have grown gently in the second quarter of 2024, after a positive first three months of the year.

"Economic output is likely to increase slightly again in the second quarter of 2024," the German central bank said in its monthly report.

Europe's largest economy exceeded expectations in the first quarter, when it posted growth of 0.2 per cent.

The positive figures came as a relief after German output shrunk by 0.5 per cent in the last quarter of 2023 at the end of a difficult period of high inflation.

An improvement in the services sector was behind much of the rising German growth figures.

Businesses in the sector could see their "recovery continue", the Bundesbank said.

The trend could "broaden and intensify" if there was a renewed increase in private consumption, the central bank said.

Households had seen their purchasing power shrink amid high inflation, but slowing consumer price rises and increased salaries has seen the picture brighten.

The rise in energy prices which drove the inflation wave likewise weighed on energy-intensive sectors, such as chemicals and steel.

These industries could "recover moderately" but a longer-term boost seemed unlikely while orders were down, the Bundesbank said.

Meanwhile, there were still few signs of life in the construction sector, which was still "very weak".

The German government in April raised its growth projections for 2024 to 0.3 per cent from 0.2 per cent.

While activity in Germany was "gradually picking up speed again", in the view of the Bundesbank, the sort of growth rates predicted by the government would still more than likely leave it lagging other major economies.