Germany Economic Outlook
As expected by our panelists, the economy avoided entering a technical recession by the skin of its teeth in Q1. The result had been foreshadowed by high frequency data. Inflation fell in Q1 compared to Q4, leading consumer sentiment to improve and the services PMI to rise into expansionary territory over the quarter. That said, the manufacturing PMI fell slightly further into contractionary territory and merchandise exports grew slightly less in annual terms in January–February. In Q2, our panelists expect the economy to grow. The services PMI plus consumer and business confidence all ticked up in April, boding positively for private spending. In other news, in late March, the three ruling parties—the SDP, FDP and Greens—struck a deal on climate change and infrastructure measures—but only after three days of grueling talks, adding to the impression of a gridlocked government.
Germany Inflation
Harmonized inflation fell to 7.4% in March from 8.7% in February due to a sharp slowdown in energy prices. This year, inflation is expected to cool as the base effect toughens and domestic demand eases. Key factors to watch include the EU’s energy price cap, further disruption to natural gas supply and additional government intervention.
This chart displays Economic Growth (GDP, annual variation in %) for Germany from 2013 to 2022.