Bundesbank expects temporary rise in inflation and forecasts moderate economic growth

In its latest monthly report, the Bundesbank warned that inflation will “temporarily rise” towards the end of the year. This upturn is expected when the currently negative inflation rates for energy become positive and the low profit margins for mineral oil products begin to recover.

Looking ahead, the Bundesbank is forecasting slight growth in German economic output. The report notes that ongoing weakness in the construction sector and industry – largely due to weak foreign demand – is likely to persist. Despite these challenges, the Bundesbank expects growth in private consumption and the services sector in the third quarter.

The report highlights that, given the increase in real household incomes, “consumer spending should increase,” even if this may be slow. The GfK consumer climate index for July was above the average for the previous quarter, continuing its upward trend of recent months.

You can find the Bundesbank’s complete monthly report here.