Germany's Bundesbank Sees GDP Growth Again in 2Q

By Ed Frankl and Hans Bentzien

The German economy is expected to post a second straight quarter of growth, the country's central bank said Wednesday, recovering from a 2023 downturn on a robust services sector and improving disposable incomes.

"Economic output is likely to increase slightly again in the second quarter," it said, after the country reported 0.2% growth in the first three months of the year.

That marked a rebound from the 0.5% decline in gross domestic product that Europe's largest economy saw in the final quarter of 2024.

Germany's services sector is likely to grow further in the April-June period, driven by rising household incomes and consumer spending, it said. German consumer confidence reached a two-year high in data released late April.

"Rising disposable household incomes are likely to gain the upper hand over consumer uncertainty," the Bundesbank said.

After helping the economy to a rise in the first quarter, production in energy-intensive sectors should steadily improve, the report said. However, demand will need to pick up further for a stronger uptick, with a brighter outlook for business expectations only likely to provide more momentum in the second half of the year. The construction sector remains very weak, the central bank added.

But Germany's labor market is likely to remain robust and wages look set to continue to rise rapidly. That could be a risk to cooling inflation, which the Bundesbank said would rise again a little in May before fluctuating in the following months.

Write to Ed Frankl at [e-mail] and Hans Bentzien at [e-mail]

(END) Dow Jones Newswires

05-22-24 0752ET