Bundesbank: German Economy Unlikely to Escape Stagnation in Q1, Inflation to Fall in Coming Months

22 January 2025

By Marta Vilar – MADRID (Econostream) – The German economy was likely to remain in a stagnation situation in Q1 2025, while inflation, which would remain high early in the year, would probably come down in the following months, according to the German Bundesbank’s latest monthly report, published on Wednesday.

‘The German economy remained listless in the fourth quarter of 2024’, the report said.

The industrial sector had likely remained weak in Q1, while foreign orders were still slow and business sentiment had fallen, the Bundesbank said.

‘By contrast, private consumption and the related services sectors are likely to have provided positive impetus’, it said. ‘The steep rise in wages provided scope for additional consumer spending.’

However, consumer sentiment had not picked up, and this had impeded a strong recovery in consumption, according to the Bundesbank.

‘It is also unlikely that the German economy will manage to escape the prolonged period of stagnation in the first quarter of 2025’, the report said.

Inflation would probably remain high at the outset of the new year, the Bundesbank stated.

‘This is due to the further increase in the carbon price on fossil fuels as well as higher prices for the “Deutschlandticket” [railway pass] and for private health insurance’, the report added.

However, the Bundesbank said that inflation was likely to decline in upcoming months and that services inflation would fall sharply, but while remaining markedly above its long-term average.