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In the Bundesbank’s assessment, the German economy appears to be overcoming the cyclical slowdown more quickly than was widely expected. In their latest report, the Bundesbank economists cite, as indications of this, improved expectations in the corporate sector as well as positive developments in industrial orders and output. The consumer climate is considered to be extremely positive, which the economists say is likely to boost private consumption.

"Perceptible upside risks"

The dramatic decline in crude oil prices is likely to have a positive impact on the outlook for the economy, says the Bundesbank. The fall of around half in US dollar terms within the space of a year will bring considerable relief for energy budgets. As is stated in the Monthly Report, this usually has a positive effect on the economic decisions of households and enterprises.

"As most of the decline in crude oil prices has not yet been incorporated into the December forecast, there are perceptible upside risks for its projected economic growth in 2015 and 2016," write the Bundesbank economists. In early December last year, they predicted growth in real gross domestic product (GDP) to be 1.0% in 2015 and 1.6% in 2016.

As the Bundesbank sees it, lower oil prices will probably have an impact on inflation. In December, the Bundesbank forecast consumer inflation – as measured by the Harmonised Index of Consumer Prices (HICP) – of 1.1% for 2015. Owing to oil price developments in the interim, the inflation forecast for the current year would have to be revised downwards considerably, write the Bundesbank economists.

Stronger external demand in 2014

Following weak economic growth of 0.1% in 2013, real GDP increased by 1.5% in 2014 according to the provisional figures of the Federal Statistical Office. The Bundesbank believes that the economic recovery in the euro area as well as in other major industrial and emerging economies has led to an increase in external demand. This has strengthened the willingness of enterprises in Germany to invest in tangible fixed assets, as the Bundesbank economists explain in the Monthly Report.

Other main topics in January

Besides the outlook for the economy, the latest Monthly Report contains an article on the Common Credit Assessment System (CoCAS). This system, which was co-developed by the Bundesbank, is designed to assess the eligibility of enterprises in the euro area. Another main topic is the role played by trade in goods in the development of global imbalances.