Bundesbank-Monatsbericht: Deutsche Wirtschaft verliert vorübergehend an Fahrt

The Bundesbank's monthly report indicates that the German economy may experience a temporary slowdown before rebounding by the end of the year. The bank's September report projects that the economy will strengthen again in the fourth quarter, but this will depend on the outcome of the conflict in the Middle East and the normalization of waterways.

The drought and low water levels during the summer could only result in a slight increase in the country's Gross Domestic Product (GDP) compared to the previous quarter. However, the recession caused by the low water level in the Rhine is expected to slow down industrial production. Exports are also expected to have a smaller contribution to economic growth.

Private consumption is also anticipated to remain restrained due to high energy prices resulting from the Iran war, which are lowering people's purchasing power. The overall inflation rate increased significantly in August, with consumer prices being 2.9% higher than the previous year. Inflation remains a concern, with the Bundesbank stating that the inflation rate will likely remain elevated for now.

The high energy prices are expected to continue for some time, leading to a rise in other prices as transportation and production become more expensive. If inflation remains high for an extended period, it could have direct and indirect effects, delaying the return of the inflation rate to the European Central Bank's (ECB) target of 2.0% long-term.

The ECB considers a 2.0% inflation rate as its primary goal to maintain a stable euro and preserve people's purchasing power. As inflation rises, people can afford less with each euro.