The federal government believes that the economic situation in Germany has recently deteriorated somewhat. According to the monthly report published by the Federal Ministry of Economic Affairs on Monday, while recent sentiment indicators had improved noticeably, the start of the third quarter shows a “slowdown in the previously quite robust economic momentum.”
The specialized boom in energy-intensive industries, which had been sustained by increased foreign demand stemming from the conflict in the Middle East, appears to be receding as the year progresses. Indicators concerning domestic consumption also point to “declining momentum” in the private sector, particularly against the backdrop of persistently high energy prices. Furthermore, the ministry notes that the ongoing low water levels are expected to have a dampening effect this quarter, in addition to the continued Middle East conflict, which has renewed uncertainties and raised energy prices.
Overall indicators for private consumption also painted a cautious picture. Although economic and income expectations saw some recovery in the GfK consumer climate in August, the willingness to purchase remained stubbornly weak. While the HDE consumer climate index managed to nearly recover the previous month’s decline in September, it remains below its level at the start of the year. Similar positive trends were observed in the sector outlook and expectations for the retail business climate according to August’s Ifo Survey. The monthly report concluded that the economic recovery in the third quarter is likely to encounter a “noticeable brake.”
