Germany’s economy is bracing for a challenging first quarter, with ifo Institute projecting a contraction in GDP by -0.2%. Timo Wollmershäuser, Head of Forecasts at ifo, indicated that this decline would “tip the German economy into recession.”
Wollmershäuser explainsed, “Companies in almost all sectors of the economy are complaining about falling demand”. In the manufacturing and construction sectors, where once robust order backlogs have significantly “melted away”. A concerning trend of decreasing incoming orders has been observed for several months, with residential construction experiencing a notable surge in cancellations.
“It appears that restrictive monetary policy in Europe and North America, with its aim of stabilizing prices through sharp rises in key interest rates, is now taking full effect,” Wollmershäuser added
Unique factors further aggravate the situation. Wollmershäuser notes, “High illness levels, rail strikes at Deutsche Bahn, and an unusually cold and snowy January,” are additional burdens on the economy. Despite these factors, he finds a silver lining in private consumption, which shows some positive trends.
