Bundesbank The German economy may disappoint as sentiment deteriorate

Despite a modest rebound in the second quarter, the German economy may contract by more than anticipated just a few weeks ago, according to a statement released by the Bundesbank on Monday.
Industry-heavy In the wake of the pandemic, Germany is bearing the brunt of a decline in global demand for products, which is the result of higher borrowing costs dampening investment and people spending more on leisure, travel, and other services.

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As a result of a stabilization in consumer spending, the Bundesbank predicted that Europe’s largest economy grew marginally in the three months to June, following two consecutive quarters of contraction.

The outlook, however, was gloomier than the central bank’s own estimate of a 0.3% contraction this year, which was published less than a month ago.

“The economic recovery for the remainder of the year may therefore be somewhat less robust than anticipated in June,” the Bundesbank said.

According to a survey conducted by the Ifo institute, German business sentiment deteriorated for the second consecutive month in June, particularly in the industrial sector.

The Bundesbank anticipated that inflation, its and the European Central Bank’s primary concern at the moment, would continue to decline in the coming months as reduced producer prices trickle down the supply chain.

Core inflation, which excludes energy and food costs, should remain elevated, however, also due to a surge in packaged vacations, which now carry a larger weight in the index.