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The German economy has been experiencing a recovery since the beginning of this year. Overall economic growth, which was very moderate in the first quarter due to the weather, expanded faster in the second quarter. In industry and construction, two sectors sensitive to economic cycles, production did weaken in May, but overall the production figures for the first quarter were clearly exceeded in the first two months of the second quarter in both sectors. The external conditions for the German economy continue to vary widely. The weak development in the eurozone continues to reduce the rate of growth.
German exports weakened appreciably in May (seasonally adjusted), but the trend is still moderately upwards. Recessionary developments in major trading partners in the eurozone are having a negative effect. Nevertheless, the prospects for the development in German exports remain positive, particularly with a view to the markets outside the eurozone.
Following some clear increases in the first few months of the year, the industrial sector registered a softening of output in May, the decline in production, however, was very moderate. The trend in industrial output is still pointing clearly upwards,whereas the development in new industrial orders is currently suggestive of a more moderate expansion in industrial output in the coming months. Both the ifo business climate index for the manufacturing sector and the ZEW Indicator of Economic Sentiment improved further in June.
With the general situation for construction projects remaining favourable, the overall outlook for the construction sector remains positive.
Consumer spending remains a pillar of the overall economic development. Whilst consumer spending was one of the main pillars of growth in the first quarter, the further rise in retail turnover indicates that consumer spending is expected to stimulate growth in the second quarter as well. In view of a continuing good situation on the labour market, with sharp rises in income and ongoing low inflation, consumers are in an optimistic mood.
The upturn in employment is continuing at a moderate pace (seasonally adjusted). Unemployment is falling. As the economy continues its slight improvement, the outlook for the resilient labour market in Germany remains positive.