In their most recent monthly report, the experts at Bundesbank forecast that Germany’s economic output will experience a modest increase in the second quarter of 2023. A confluence of factors, including easing supply bottlenecks, a substantial backlog of orders, and a decrease in energy prices, are all expected to bolster the ongoing recovery of the industrial sector.
Despite the continuing high inflation, the sharp rise in wages should prevent further declines in the real net income of private households. As a result, private consumption is predicted to remain steady, rather than falling.
Bundesbank stated, “The German economy stagnated in the first quarter of 2023 after shrinking in the previous quarter”. The bank’s experts maintain an overall slightly positive outlook for the labor market, although they note that its prospects have not brightened further in recent months.
In light of the robust labor market, high inflation, and the anticipated economic improvement, the Bundesbank predicts, “high wage agreements can also be expected in the coming months”.
ECB Stournaras: Recent jump in inflation is due to temporary factors
ECB Governing Council member, Bank of Greece Governor, Yannis Stournaras told Bloomberg, “according to most estimates, the recent jump in inflation is due to temporary factors related to various supply-side bottlenecks caused by the pandemic.”
“Wage developments and unit labor costs which determine the core of inflation do not show the same volatility as headline inflation,” he added. “On this evidence, I would advise caution regarding the course of inflation relative to our medium-term target.”