The Bundesbank expects the German economy’s boom to continue, although the Bank’s economists predict that the growth rate of gross domestic product might be distinctly lower in the first quarter of 2018 than in the preceding quarters. This is, the Bank’s economists believe, mainly attributable to the strong contraction in industrial output in February. "The strikes in the metalworking and electrical engineering industries and the particularly severe flu outbreak this year probably contributed to the decline by a seasonally adjusted 2% on the month", the report states. The unusually severe flu season is also likely to have dampened economic activity in other sectors, the economists note. On an average of January and February, industrial output was down by ¼% compared with the fourth quarter of 2017.

Favourable orders situation in industry and construction

The Bank’s economists still consider the orders situation in both industry and construction to be very favourable overall, however. According to data from the Federal Statistical Office, on an average of January and February, industrial enterprises received 1½% fewer orders than in the preceding quarter. However, this must be viewed in the context of the exceptionally large volume of orders towards the end of 2017, the Monthly Report states. For instance, the level of orders in February was clearly higher than the figure for the fourth quarter of 2017.

In February, output in the construction sector declined by a seasonally adjusted 2¼% on the month. This, the Bank’s economists believe, was attributable to the colder than average weather conditions. Furthermore, the preceding months’ figures were revised upwards significantly. That said, on an average of January and February, construction activity increased by 1¼% compared with the final quarter of 2017. The construction sector is at full capacity overall, the Bundesbank writes in its Monthly Report.

Further fall in unemployment

As in the previous months, employment rose further in February according to Federal Statistical Office data. After seasonal adjustment, 45,000 more persons were in employment than in the previous month. Employment went up by 618,000 persons or 1.4% over the past twelve months. The Bank’s economists emphasise that these are jobs subject to social security contributions for the most part. The seasonally adjusted unemployment rate was also down again in March. The Bundesbank expects that unemployment will fall further over the next three months; indicators of the Institute for Employment Research (IAB) showed this.

There was no further growth in consumer prices in March after seasonal adjustment. "Somewhat stronger price increases for services and a moderate upward momentum for rents were offset by falling prices for energy and other industrial goods", the Bundesbank writes in its Monthly Report. Food prices were largely unchanged. In February and March 2018, the Harmonised Index of Consumer Prices was up by 1.2% and 1.5% on the year respectively. The rise was predominantly due to a base effect owing to the steep decline in food prices in March 2017.