Bundesbank: economy continues restrained upward trend

Bundesbank: economy continues restrained upward trend

"Industrial production increased noticeably in july, and construction activity expanded significantly," the central bank stated in its monthly report published in frankfurt on monday.

Together with the largely satisfactory assessment of the situation in industry, this suggests that the german economy will continue to grow for the time being, albeit only slowly. However, she says the outlook is still marked by great uncertainty. Signs of a weaker economy were also visible on the labor market.

German economy grew by 0.5 percent in the first quarter and by 0.3 percent in the second quarter. Due to the partly severe recession in the south of europe, the development in the further course of the year is considered uncertain. Some economists believe it is possible that economic output will contract slightly in the third or fourth quarter.

In any case, sentiment in the german economy remains mixed for the time being. In september, the economy surprisingly slumped further, with the ifo business climate index falling for the fifth month in a row due to the euro debt crisis and the global drop in demand. "The companies surveyed are once again less satisfied with their current business situation. They are also more pessimistic about the future," said ifo president hans-werner sinn in munich on monday.

However, from the bundesbank’s point of view, the german economy is being held back by consumers’ continued appetite for spending and the flourishing housing market. In addition, there are indications that investment by companies in new equipment will not decline any further.

Despite the downturn in the ifo business climate, the berenberg bank also does not expect a recession in germany. "The german economy will avoid recession and regain stronger momentum shortly before the end of the year," said berenberg chief economist holger schmieding on monday. The september drop in the ifo index is a reminder, however, that the german economy and economic developments in the euro zone are interrelated. Policymakers must do more to lead the euro zone economy out of the crisis.

Alexander koch of the bank unicredit also emphasized that the hard data on german industry since the beginning of the second half of the year had all turned out better than expected: "industrial production in particular remained clearly above the level of the second quarter in july."Overall, the sharp drop in the business climate due to the uncertainties caused by the debt crisis paints an overly pessimistic picture of the current economic situation.