Bundesbank’s latest monthly report revealed a likely contraction in Germany’s real GDP during Q3, attributing this slump to dwindling foreign demand for industrial goods. Elevated financing costs have not only hampered investments but also stymied domestic demand, particularly in the construction and industrial sectors.
Despite these economic headwinds, German job market has shown resilience, with pronounced wage increases amidst declining inflation offering a silver lining. However, this positive spin has yet to translate into increased consumer spending. Data suggests that private households are opting for caution, channeling additional funds into savings rather than expenditure, a trend underscored by diminished real sales in the retail and hospitality industries.
Inflation dynamics in September offer a mixed bag. The report highlighted a moderate uptick in energy and food prices, whilst services experienced an above-average increase. Bundesbank anticipates a deceleration in inflation in the forthcoming months.