According to the Bundesbank, the slump in domestic consumption, weak demand from abroad and increased interest rates slowed the German economy in the summer. “The real gross domestic product (GDP) is likely to have shrunk somewhat in the third quarter of 2023,” said the Deutsche Bundesbank’s monthly report published on Monday. There was a tailwind from the continued robust labor market and strong wage increases with declining inflation. “However, private households have probably not yet used the additional spending flexibility to increase consumer spending,” the experts wrote.
This was indicated by the weak real sales in the retail and hospitality sectors. The annual inflation rate in Germany weakened to 4.5 percent in September after 6.1 percent in August. Above all, above-average increases in food prices continue to cause problems for consumers.
The global economy is recovering only slowly
According to the Bundesbank, economic development was also slowed by the continued weak demand from abroad for industrial products “Made in Germany”. According to the International Monetary Fund (IMF), the global economy is recovering only slowly from the consequences of the corona pandemic, the Russian war against Ukraine and high inflation. The export-oriented German economy is feeling the effects of this.
In the fight against high inflation in the euro area, the European Central Bank (ECB) has raised interest rates ten times in a row since July 2022. Higher interest rates make loans more expensive, which can slow down demand and counteract high inflation rates.
The Federal Statistical Office will announce an initial estimate next Monday (October 30) of how the German economy developed in the third quarter. (dpa)