The key facts
- Germany's economy likely stagnated in Q3 — Bundesbank
- September inflation: 3.3% versus 2.9% in August, the highest since late 2023
- The bank expects further pressure on prices from the expiry of fuel tax relief and a healthcare reform in 2027
Stagnation in the third quarter
Germany's economy likely did not grow in the third quarter, the Bundesbank reported on Wednesday in its October report. The central bank partly linked the pause in the recovery to temporary factors, including low water levels in the Rhine and effects related to the fuel tax relief.
Pressure on industry and trade
High energy prices reduced household purchasing power. Weakness in the automotive sector, as well as the concentration of factory vacations in August, held back industrial production that month. Low water levels disrupted shipping and raised transport costs for energy-intensive industries, including oil refining and the chemical industry, which affected foreign trade. Construction output rose in August, although rising mortgage rates are expected to limit activity.
Inflation accelerated
Annual harmonized inflation rose in September to 3.3% from 2.9% in August amid rising energy prices due to the conflict in the Middle East. This is the highest figure since late 2023.
Bundesbank forecast
The bank expects inflation to remain elevated, as rising energy costs will increasingly be reflected in the prices of industrial goods, food and services. Additional inflationary pressure, according to the bank, will come from the expiry of the fuel tax relief and a healthcare reform that, starting in early 2027, raises patients' payments for medicines and hospital services.
