Bundesbank: German Economy Likely to Stall in the Final Three Months of the Year

Forex - The German Central Bank (Bundesbank) stated that it is likely for the German economy to stagnate in the last three months of the year, due to a continued softening in the labor market and the approach of potential new trade tariffs.

The Bundesbank noted that there are very few signs indicating that the recovery observed in the third quarter would continue into the fourth quarter, primarily due to weak foreign demand and investment.

In its monthly report, the Bundesbank said, "Therefore, all fundamental demand components currently offer very little reason for a noticeable recovery in the German economy in the short term."

Warning that "political demands for new tariff barriers pose significant additional risks to international trade," the Bundesbank added that recent concerns about a new surge in inflation due to high wage increases, which peaked at 8.8% in the third quarter for collective agreements, will likely now be "markedly lower."

The Bundesbank also assessed that, given the prolonged economic weakness and significantly decreasing inflation rates, upcoming wage negotiations are expected to result in agreements that are noticeably lower compared to the past two years.