Bundesbank turns more pessimistic about economy this summer - German Economy Stagnates as GDP Contracts, Bundesbank Warns of Further Slowdown
The German economy faces a challenging period, with the GDP contracting by 0.3 percent in the second quarter. The Bundesbank warns of further stagnation or minimal growth by 2025, driven by industrial weakness, particularly in the automotive sector, and global trade policies.
The Bundesbank's October report suggests that the economy may have stagnated in the summer quarter, adjusted for inflation. Industrial production fell in August, especially in the automotive sector, following a strong July. Consumers are holding back on spending, while the labor market remains robust.
The Bundesbank sees a risk that the financial situation of many municipalities will worsen in the public sector. Municipal debts should be offset against the credit limits of the respective state, and states should provide more money to communities if strict consolidation requirements are not met.
The German economy is unlikely to recover in the third quarter, with the Bundesbank expecting stagnation or minimal growth by 2025. The pessimism is driven by ongoing industrial weakness, the crisis in the automotive sector, and US trade policies. States must address municipal debts and provide additional financial support to communities to mitigate the risk of worsening financial situations.
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