The German government assesses that the recent economic recovery in Germany has somewhat softened. Following a period of renewed growth at the start of the year, the second quarter appears to be exhibiting a weaker dynamic, according to the Federal Ministry of Economics’ monthly report published on Monday.
While sentiment indicators have noticeably improved in recent months, particularly regarding business expectations, the latest data on economic development paints a more cautious picture. Industrial production has partially recovered following a significant decline in April; however, the truck toll mileage index – a leading indicator for industrial production – suggests a weakening trend for June.
Orders received by the manufacturing sector have remained volatile against a backdrop of persistent trade and geopolitical uncertainties. Following a strong resurgence in merchandise exports at the beginning of the year-partly fueled by anticipation of announced tariff increases by the US administration-exports have significantly declined in the first two months of the current quarter, particularly in trade with the United States. The ministry anticipates that foreign trade will likely exert a dampening effect on overall economic growth in the second quarter.
The discernible economic upturn experienced at the beginning of the year does not appear to be gaining further momentum in the second quarter. This is attributed not only to the normalization of anticipatory effects observed in the first quarter, ahead of the announced US tariffs, but also to the ongoing uncertain trade and geopolitical environment. The related uncertainty is likely to persist, initially extending the suspension of so-called “reciprocal” tariffs previously announced by US President Trump until August 1st.
