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According to the latest issue of the Bundesbank's Monthly Report, Germany's economy continued to register solid growth in the fourth quarter of 2015, probably primarily on the back of strong consumption, as in the preceding quarters. Reasons given by the Bundesbank's economists for the persistently buoyant consumption activity include strong employment growth, a distinct increase in wages and salaries and additional expenditure in connection with the massive influx of refugees.

Consequences of decline in oil prices

According to the Bundesbank, the sharp decline in crude oil prices around the turn of 2014-15 was one of the factors which lent a meaningful boost to consumption. This sent energy prices significantly lower, taking pressure off households' budgets. Crude oil prices dropped sharply once again towards the end of 2015, taking them to their lowest levels in more than 10 years. The Bundesbank's economists believe that, should these prices become entrenched at their current level, consumer price inflation will likewise remain low in the months to come. In their December forecast, they had assumed that the inflation-dampening effect of crude oil prices would gradually peter out. According to their current assessment, persistently low oil prices could also additionally boost domestic demand owing to the attendant purchasing power gains.

Large number of orders received by industry

The Bundesbank's economists also see industrial activity as possibly making a positive short-run contribution to economic activity, noting a distinct rise in new domestic and foreign orders received by industry. They point to the improved business outlook in the industrial sector and to the brighter export expectations of late. To quote the Monthly Report, "There therefore also exist opportunities at the start of the year for stronger growth in economic output." This contrasts with the autumn of 2015, in which, according to the Bundesbank, industrial activity had not yet regained its footing.

Further topics in the Monthly Report

Besides summarising the current state of economic activity, the Bundesbank has devoted a special article to an in-depth treatment of investment. In it, the Bundesbank's economists investigate euro-area investment activity in greater detail. A further feature article looks at alternative indicators of price competitiveness as a determinant of real goods exports. Moreover, the Monthly Report also addresses the supervision of less significant financial institutions in Germany.