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Germany is bracing for another quarter of economic contraction, as reported by the Bundesbank today. The country, which has been grappling with high energy costs and supply chain disruptions, is currently listed among Europe’s weakest economies. Despite these challenges, there are early indications of a potential recovery in the coming year.
The Bundesbank’s latest forecast suggests that Germany’s economy will continue to face difficulties in the final quarter of 2023. This period marks an extension of the industrial downturn that has been exacerbated by the ongoing war against Ukraine, rising energy prices, and increasing interest rates. Out of all quarters this year, only one has experienced growth, highlighting the severity of the economic headwinds.
However, there is a glimmer of hope on the horizon for 2024. The Bundesbank notes solid employment figures and wage increases that could underpin an eventual upturn. Tentative signs of recovery in foreign demand and an anticipated boost in real consumption from higher net incomes are also among the positive factors cited.
Yet, even with these potential drivers, there is still no definitive sign of a rebound in global industrial activity as new orders continue to decline and overall demand remains weak. The economic report also mentioned that the exchange rate has remained stable post-publication, with EUR/USD trading at 1.0930.