Germany's central bank Bundesbank said in its monthly report on Thursday that the German economy "could suffer a setback" in the second quarter after its real gross domestic product (GDP) rose slightly in the first quarter. The bank warned that the underlying cyclical trend remains weak overall, including sluggish domestic and foreign demand for German industrial products and a weakening labor market.
The Bundesbank estimated that the slight recovery in industrial output in the first quarter is "likely to be only temporary" as exports to the United States rose ahead of tariff announcements, but the levies imposed in April could "lead to corresponding setbacks in the second quarter." Inflation is forecast to decline in the near future due to lower energy prices and the euro's appreciation against the dollar. However, the Bundesbank noted that the inflation outlook is "characterised by particular uncertainty."
