Following the surprisingly strong growth of the German economy in the first quarter, the current cyclical indicators point to a subdued development in the second quarter.[1] The signals from the service sector suggest that the strong growth at the beginning of the year will slow down somewhat in the second quarter. In addition, industry continues to experience a period of weak growth. While industrial output has recently recovered somewhat at a low level, it has been showing a downward trend since the turn of the year 2017/18. The weak development of new manufacturing orders and the gloomier business climate indicate that the clearly subdued trend in industrial activity is likely to continue. Recently, the construction industry also recorded a sharp decline in output, albeit from a very high level. Even though the labour market is starting to show signs of the economic slowdown, it keeps producing noticeable domestic economic momentum. The number of people in work is continuing to rise, albeit at a slower pace, and income rises are bolstering consumer spending. The government is providing fiscal stimuli, thereby fostering both consumer spending and public spending on consumption and investment. Following restrained growth in the second quarter, the positive forces for growth are likely to prevail again as soon as the global economic environment improves. However, the economy is currently facing considerable downside risks, not least due to trade conflicts, the Brexit process and geopolitical tensions.

For more information about the economic situation in June, please click here.