In the monthly report, Bundesbank said German economy continued recovery at a “faster pace” in summer. economic output is “likely to grow more stronger in the third quarter than in Spring”. But, due to supply-side difficulties, output had not reached pre-pandemic level yet.
Production level “continued to lag behind strong demand” because of supply bottlenecks. In July, demand for industrial productions already exceeded pre-pandemic level by a whopping 18%. But production remained -3.5% below the pre-pandemic levels. Labor market “recovered extraordinarily strongly since June” and unemployment is likely to continue to fall sharply in the next three months.
On inflation, Bundesbank said, “rates between 4 percent and 5 percent are temporarily possible from September until the end of the year”. One reason for this is the base effect of the temporary VAT reduction in the previous year. The economists assume that inflation will decrease noticeably at the beginning of 2022, but will still be over 2 percent by the middle of the year.
