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Europe's biggest economy has struggled for the past year with
surging energy costs and rising borrowing costs but a recent set
of indicators, such as a sentiment figures from the ZEW economic
research institute and fresh PMI data suggest that at least a
bottom has been reached.
But the central bank's analysis did not point to any meaningful
recovery either, suggesting that 2024 will be another weak year
for an economy traditionally considered Europe's powerhouse.
"Industry in particular will likely remain in a weak phase," the
Bundesbank said. "No major stimulus is expected from private
consumption for the time being either."
New industrial orders remain poor with both domestic and export
demand at low levels and only a still relatively high backlog is
cushioning the sector.
High interest rates are weakening domestic demand, particularly
for investments, but uncertainty over major issues, like climate
policy, also weigh on investment decisions, the bank added.
While consumers are holding back spending, their buffers are
increasing as inflation is falling and nominal wages are rising,
so spending capacity is at least building up.
Inflation could fall further in the coming months but some
fluctuation is likely and price growth in services will come
down only slowly, the Bundesbank added.
Despite Germany's muted economic prospects, firms continue to
hold onto their workers and unemployment is only expected to
rise slightly in the coming quarter, the bank said.
Firms struggled to rehire workers when the economy opened up
after the pandemic so they have been hoarding labour despite a
year of no growth on the premise that it was still cheaper to
maintain a steady workforce than to struggle during an upturn.
(Reporting by Balazs Koranyi; Editing by Toby Chopra)
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