With wage growth easing, household purchasing power will grow at a slower pace in 2025 than in 2024. Employment growth will no longer play a role as a source of economic support either. That leaves household consumption as an economic driver but with less traction than previously assumed. This will be compounded by headwinds from US protectionism. KfW Research expects price-adjusted economic growth of +0.5% in Germany in 2025, after 0.1% in 2024. Thus, aggregate production capacity will remain underutilised. The euro area economy is likely to present itself in a more robust form, with growth rates of +0.8% in 2024 and +1.0% in 2025. Euro area inflation is likely to align with the ECB's 2% target again in 2025 (euro area: +2.0%; Germany: +2.1%).

Press release

KfW Business Cycle Compass November 2024(PDF, 230 KB, accessible)