According to the Federal Government’s assessment, the economic momentum across Germany noticeably slowed during the first quarter, a decline attributed to the ongoing conflict in the Middle East. While initial indicators for both the corporate sector and consumers showed a slight recovery at the beginning of the year, this optimism has since dimmed considerably following the conflict.
Several factors have weighed on the economy. The industrial sector has performed poorly lately, and construction has seen significant downturns due to adverse weather. These challenges have been compounded by ongoing supply chain bottlenecks and the rising costs of both energy and raw materials. Consumption-related areas have suffered particularly from increased prices, diminished demand, and prevailing uncertainty.
The Ministry states that the future economic trajectory largely depends on resolving the Middle East conflict; however, even if stability returns, persistent high energy costs, supply problems, and economic headwinds are expected to continue.
Looking deeper into industrial trends, the economy showed a discernible weakening over the winter months. Although new orders were able to maintain their upward trajectory after a noticeable dip in February, industrial production has slightly contracted recently. Preliminary data suggests a possible cooling trend for the industrial sector in the second quarter.
In consumer spending, price-adjusted retail sales fell by 0.5% in February compared to the prior month. Conversely, private car registrations witnessed a year-on-year increase of 5.2% in March when compared to the previous month.