Bundesbank highlights modest improvement in German economy with ongoing risks

Bundesbank, in its latest monthly report, suggested some improvement in the German economy though underlying weaknesses remain. The report notes, “Germany’s economic situation has brightened somewhat, but it remains weak at its core,” signaling uncertainty about the sustainability of economic growth into the second quarter.

Despite these challenges, there has been a noticeable rise in optimism among consumers, businesses, and investors, potentially setting the stage for a stronger economic recovery than previously anticipated. The Bundesbank highlights, “If this improvement continues, the economy could also pick up more significantly than was expected a month ago.”

However, the report also points out several areas of concern. Industry continues to struggle, and the construction sector might see a downturn following a temporary boost from a mild winter. Furthermore, high interest rates are suppressing investment activities, and while export demand shows weakness, consumer spending remains restrained despite favorable conditions in the labor market, such as rising wages and slowing inflation.