The German central bank expects the economic recession to continue until the new year

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The expectations of the German Central Bank indicated that the German economy won’t achieve growth in the third quarter of this year, after the recession that it also recorded in the second quarter.

“German economic output is likely to remain largely unchanged again in the third quarter of 2023,” German central bank monthly report said.

At the same time, the central bank saw that private consumption could boost the economic situation in light of the stable employment movement and the strong rise in wages with low inflation rates.

According to the central bank report, “Job growth will likely remain strong and will even continue into the New Year”.

The central bank noted that weak demand from abroad would continue to affect industrial production, highlighting that high interest rates hindered demand for construction and investment goods.

The inflation rates expected to continue declining in the coming months due to lower energy prices, and it’s expected that the Federal Statistical Office will announce by the end of the week more details of German gross domestic product development at the 2nd quarter on 2023.

The German economy recorded in the first half of this year what known as a technical recession, which refers to the economy’s exposure to GDP contraction for six months in a row two consecutive quarters.

The central bank recently predicted an inflation rate of 6% in Germany, as measured by the harmonized index of consumer prices, which is a crucial factor in determining the ECB’s monetary policy.

The energy price shock in the aftermath of the Russian war on Ukraine last year caused a general rise in the inflation rate in Germany and the rest of the European Union.

Meanwhile, the European Central Bank seeks to reach the inflation rate in the Euro Zone at 2% in the medium term, and the European Central Bank raised interest rates in the recent period nine times in a row to combat rising inflation in the European common currency area.

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