Despite the initial boost in the first quarter of the German economy, there is still no evidence of sustained improvement. The decline in demand for industrial products both domestically and abroad continues to hold back growth. Higher interest rates and economic uncertainty are also hindering investment, while households remain hesitant to spend.
It is uncertain whether the increase in economic output will continue in the second quarter. Germany’s weak demand conditions and poor consumption activity have contributed to this perception, making it clear that this country remains the sick man of Europe. This may prompt the ECB to consider loosening policy sooner rather than later in order to stimulate further growth.