Economic output in Germany increased again somewhat of late according to the Bundesbank’s Monthly Report. Benefiting from favourable weather conditions, construction in particular picked up again recently. “Industrial output and exports [also] performed better than had been expected based on the weak demand,” the economists write. However, private consumption remained sluggish in the first quarter. Consumers were unsettled despite the stable labour market and real income growth. Inflation eased only marginally and stood at 2.7% in the first quarter.

Germany’s current account recorded a surplus of €27.6 billion in March 2024, down €1.1 billion on the previous month’s level. This was mainly attributable to a lower surplus in invisible current transactions, which comprise services as well as primary and secondary income.

Bundesbank President Joachim Nagel, speaking at an event at Ruhr University Bochum, has called for further interest rate steps. Looking to future developments, he said: “In my view, it is by no means certain that interest rates will reach their peak as early as this summer.” He believes that the German economy is well placed to rise to the challenges ahead, even if it did contract over the past two quarters: “With regard to the remainder of the year, our economists are cautiously optimistic. Things should start to pick up again soon, then.”

According to preliminary calculations by the Federal Statistical Office (Destatis), price-adjusted gross domestic product (GDP) in 2023 was 0.3% lower than a year earlier. The calendar-adjusted decline in economic output was 0.1%. According to Destatis, high prices at all stages of the economy dampened economic activity. This was joined by unfavourable financing conditions due to rising interest rates and lower demand from Germany and abroad. 

The strategy sets out in a binding manner how the Bundesbank intends to fulfil its mandate and forms the basis for its new steering model.