The German government assesses that the economy continues to be heavily influenced by the consequences of the conflict in the Middle East, as well as by rising energy and raw material prices.
According to the monthly report released by the Federal Ministry for Economic Affairs on Friday, industry sentiment has stabilized, although dynamism among service providers has decreased. Sectors closely linked to consumer spending, such as retail and the hospitality industry, have particularly felt the hesitation among consumers, which is driven by loss of purchasing power and uncertainty.
Economic activity in manufacturing began the second quarter cautiously. After a strong rise in orders during March, there was a decline in April. Industrial production stagnated, and both incoming orders and production levels showed a downturn compared to the previous three months. Inflation slowed in May to 2.6 percent, a trend that is partly attributed to the fuel price discount.
The labor market also remained weak during the spring months. While the seasonally adjusted unemployment rate saw a slight decline in May, employment continued to decrease in April. The number of employees covered by social security insurance was also trending downwards. The ministry noted that high energy prices and the uncertainty surrounding the ongoing war in the Middle East made it unlikely that demand for labor would pick up.
