The German central bank has predicted a possible recession in the German economy in the first quarter of 2024, as it continues to face challenges. This prediction comes after the confirmation that economic output had decreased by a seasonally-adjusted 0.3 percent in the last quarter of 2023. The Bundesbank expects this decline to continue in the first quarter.
The central bank’s February Monthly Report stated that the weakness in the economy is expected to persist due to low order intake, dampened investment, and unfavorable weather conditions. Despite this, the labor market in Germany remains strong, with an increase of 28,000 people in employment in the fourth quarter of 2023.
The report noted that there are no signs of the weak economy significantly impacting the labor market. Inflation also fell to 3.1 percent in January, down from 3.8 percent in December, and the central bank anticipates further decreases in the coming months.
Despite the economic challenges, private consumption is being supported by lower inflation, a robust labor market, and strong wage growth. The report emphasized that there is currently no evidence of a recession in the traditional sense, and no such recession is expected in the near future.
