Germany's Economic Outlook Dims as Bundesbank Flags Q2 Risks

The Bundesbank has issued a cautionary note on Germany's economic prospects, suggesting a possible downturn in the second quarter following a modest GDP growth in Q1. The central bank highlights enduring weaknesses, including lackluster demand for industrial products both domestically and internationally, alongside a softening labor market.

Temporary Industrial Recovery and Export Challenges

Industrial output's slight rebound in the first quarter is viewed as fleeting by the Bundesbank, especially with U.S. tariffs introduced in April expected to dent exports. The bank also points to the euro's strength against the dollar and declining energy prices as factors likely to reduce inflation in the near term, though the inflation forecast remains shrouded in uncertainty.