The Bundesbank estimates that the German economy gained somewhat more momentum in the second quarter of 2018 than it had at the beginning of the year. According to the current Monthly Report, this was due in part to the dampening special factors in the first quarter that were then no longer a factor in the second quarter, but might, in fact, result in a countermovement. These include an exceptionally virulent wave of flu this year and a marked decline in government consumption. According to the Bundesbank’s experts, private consumption remained a cornerstone of economic growth. This was helped by the excellent labour market situation and strong wage growth.

Industrial activity gaining traction again

According to the Monthly Report, industrial activity has gained traction again. German industrial output in May rose by a seasonally adjusted 2¾% on the month and orders received, which had been declining since the beginning of the year, were showing stronger growth again. In the Bundesbank’s estimation, manufacturing could be gaining greater prominence again as a key driver of economic activity. However, the Bundesbank’s experts do not expect growth rates to be as high as last year.

Construction boom continuing

The Bundesbank’s experts also see strong growth in the construction sector, where they believe the boom was continuing. Construction output in May rose by a seasonally adjusted 3% on the month.

New orders in the construction sector in April 2018 were 5¼% down on the first quarter. However, Ifo Institute data indicate that the capacity utilisation of construction firms is still at a high level.

Marked rise in employment

Employment in Germany was rising again at the end of the period under review. In May 2018, there were 37,000 more persons in work in seasonally adjusted terms than in the previous month. According to the Monthly Report, this was due mainly to the substantial increase in jobs subject to social security contributions. At the same time, the number of persons working exclusively in low-paid part-time jobs stabilised, while the number of self-employed persons showed a further fall. Unemployment continued to decline in June. The number of persons registered as unemployed fell by 15,000 after seasonal adjustment. The labour market barometer of the Institute for Employment Research (IAB) indicates that unemployment will go on declining in the coming months, albeit to a smaller extent. At the same time, firms could be somewhat more reluctant to hire new staff over the next few months.

Consumer prices as measured by the Harmonised Index of Consumer Prices (HICP) rose in June by a seasonally adjusted 0.2% on the month. “Energy prices continued to rise moderately, probably as a result of the widening of margins at refineries”, the Bundesbank writes in its Monthly Report. Food prices also went up, while the prices of services remained unchanged.