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News from 2023-08-25 / KfW Research
KfW Business Cycle Compass August 2023
Headwinds abound, but a consumption-driven recovery is on the cards
Following a minimal contraction in the first half of the year, the economic situation remains sluggish in the summer, as construction and manufacturing are grappling with weak demand. The high stock of orders, however, is likely to further stabilise production and significant wage increases along with easing inflationary pressure should revive consumption. KfW Research therefore expects growth to gradually pick up at the end of the year and in the course of 2024. While the German economy will shrink moderately in 2023 as a whole (-0.4%), it should grow by 0.8% in 2024. Inflation will likely drop from 6.3% in 2023 to 2.5% in 2024. Euro area inflation can be expected to develop similarly, but we expect the euro area to grow at a significantly higher rate than Germany, reaching 0.7% in 2023 and 1.0% in 2024.