German economy improving rapidly

The German Central Bank announced yesterday in its monthly bulletin the economy has moved out of its soft patch at a much faster pace than previously expected aided by a weaker euro, leading to an improved outlook for Europe’s largest economy.

According to the Central Bank “The German economy will continue to benefit from the economic upturn in the current year. In the short term, the pickup will be driven mainly by private consumption”. Exporters should benefit from a weaker euro as well, which has fallen sharply against the U.S. dollar in recent months.

The bank also said: “Following extended periods of sluggish growth during 2014, economic activity in Germany regained considerable momentum even before the turn of the year”. The Bundesbank also remarked how quickly and in particular, how strongly economic growth in Germany picked up toward the end of last year.

Due to concerns over the conflict in Russia and Ukraine that hurt business sentiment, Germany had largely stagnated last spring and summer. However, falling oil prices are likely to benefit Germany, which imports a lot of its energy, while the euro’s weakness is making its exports cheaper in global markets.

The Bundesbank considers the distinct fall in the euro’s external value will provide industry with greater sales opportunities outside the euro area despite the continued moderate global economic momentum.

The European Commission recently increased its forecast for Germany to 1.5% for this year compared with only 1.1% growth it saw in November. Regarding this fact, The Bundesbank noted: “Given the brighter overall economic picture, it is understandable that current forecasts for economic growth in Germany this year are markedly higher than the projections made in the autumn of last year”

The German Central Bank finally predicted: “over the next few months, consumer price inflation, as well as import and producer prices, are likely to be negative if crude oil prices don’t increase further.”

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