MNI BRIEF: German Infl In Line With EA, Growth Lags - GCEE
Weak household demand means economic recovery will be slow, German Council of Economic Experts says in Spring Report
Inflation in Germany will fall to the euro area average of 2.4% in 2024 and 2.1% in 2025, the German Council of Economic Experts said in its Spring Report on Wednesday, but “sluggish” household demand despite rising real incomes will mean growth of only 0.2% in 2024.
The German labour market is expected to remain tight, with annual wage growth seen at 5.1% in 2024 and 3.7% in 2025 - compared with 6.3% in 2023. (See MNI INTERVIEW: German Pay Rises To Add To Inflation- Wise Man)
Global trade and industrial production will improve over the next two years, while summer ECB rate cuts are expected to improve financial conditions and stimulate private capital formation. However, these changes are unlikely to support overall economic demand until 2025 “at the earliest.” Fiscal space is tighter this year and next compared with previous years, the GCEE said, but fiscal policy remains “too tight”.