Monthly Report: Bundesbank: Economic situation better than last expected

The Deutsche Bundesbank assesses the economic situation in Germany better than a few weeks ago.

Monthly Report: Bundesbank: Economic situation better than last expected

The Deutsche Bundesbank assesses the economic situation in Germany better than a few weeks ago. "Overall, the most recent data releases were better than assumed in the December projection," said the central bank's monthly report published on Monday.

The Bundesbank referred to a preliminary assessment by the Federal Statistical Office, according to which economic output roughly stagnated in the final quarter of 2022. Many economists had expected a decline in gross domestic product (GDP) compared to the previous quarter.

The Bundesbank economists wrote that high inflation and uncertainty with a view to the Ukraine war weighed on the economy in the fourth quarter. However, the situation on the energy markets has eased noticeably compared to the summer. The delivery bottlenecks in industry and construction have become less important. In addition, government relief packages such as the electricity and gas price brake are intended to mitigate the consequences of high energy prices for private households and companies.

What the emergency aid did in December

In December, the one-off assumption of the down payment for gas and district heating customers by the state had already dampened inflation at a high level. The inflation rate fell to 8.6 percent. In November it was still 10 percent and in October 10.4 percent. “From January 2023, the gas and electricity price brakes are to be taken into account in the official price measurement. However, these should dampen the inflation rate less than the emergency aid in December,” said the Bundesbank’s monthly report.

On average, consumer prices rose by 7.9 percent over the past year. The inflation rate thus reached its highest level since the founding of the Federal Republic. Despite all the burdens, the German economy exceeded the pre-corona level for the first time in 2022. According to preliminary figures from the Federal Statistical Office, the gross domestic product grew by 1.9 percent compared to the previous year. In its forecast presented in December, the Bundesbank most recently expected economic output to fall by 0.5 percent in the current year.

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