According to the Bundesbank, the German economy, which was slowed down by the Iran war, will not grow again until autumn. Overall, after a lull in the summer, economic output is likely to increase again slightly by 0.1 percent in the third quarter of 2026 compared to the previous quarter, the Bundesbank predicts in its June monthly report.
According to the Bundesbank economists, the strongest direct burdens of the conflict in the Middle East should then subside: According to the assumption, energy prices will fall again, meaning private households will have more real income available again, which could boost consumption.
Rising inflation rate
However, the Bundesbank experts expect that consumer prices will rise more sharply in the coming months. According to their assessment, the inflation rate (HICP) harmonized for European comparison purposes in Europe’s largest economy is likely to rise above the three percent mark in the coming months. In May it was 2.7 percent.
“After the temporary refueling discount expires, energy inflation is likely to initially be higher again. In the case of gas, the higher wholesale prices will probably only reach private households with a delay due to longer-term procurement and contract structures,” writes the Bundesbank. Food could also become more expensive because producers add higher energy costs to prices. The reduction in energy tax on petrol and diesel of almost 17 cents per liter, which has been in effect since May 1, expires at the end of June.
Higher inflation rates reduce the purchasing power of consumers: they can then afford one euro less. This slows down private consumption, which is an important pillar of the domestic economy.
Stagnation in summer
For the current second quarter, the Bundesbank only expects gross domestic product (GDP) to stagnate overall. “The consequences of the war in Iran are noticeably slowing down the economic recovery, which was planned in the summer half of the year, primarily thanks to strong fiscal policy stimulus.”
In the first quarter, GDP increased by 0.3 percent compared to the previous quarter, primarily due to higher exports. There was great hope that the German economy would pick up speed again after three lean years – also because the state had initiated huge investments worth billions in roads, railways and defense. In 2025, Germany narrowly missed its third year in a row without growth with a mini-plus of 0.2 percent.