Economy: Federal government indicates turnaround in the economic trend

The Federal Government sees an improvement in the German economy after months of slack. “The latest economic indicators point to a trend reversal,” says the monthly report from the Federal Ministry of Economics. They signaled a “gradual economic stabilization,” even if the overall picture was still mixed.

“Industrial production – especially in energy-intensive areas – has recovered noticeably since the beginning of the year,” the ministry said. “And construction production has risen sharply since the beginning of the year.”

In addition to favorable weather conditions for building and civil engineering, the normalization of sick leave after the end of the cold season is likely to have contributed to catch-up effects in production. Trade in goods also tended to develop positively. However, industrial orders are trending downwards and are reducing companies’ order backlogs.

Weak orders and uncertainty are hampering growth

“Despite the gradual stabilization of purchasing power and the continued increase in employment, development in retail remains weak to the end,” said the Federal Ministry of Economics. The mood in industry and among consumers has improved significantly since the beginning of the year, and there is also a slight upturn in foreign trade. “Nevertheless, the risks are high given the still weak order situation and the ongoing geopolitical uncertainties, most recently particularly with regard to developments in the Middle East,” says the monthly report.

In their latest joint forecast for the federal government, the leading economic research institutes predict only low growth of 0.1 percent for the current year. According to forecasts, there will be an increase in gross domestic product of 1.4 percent in 2025.