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German central bank forecasts little economic growth

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FRANKFURT: Germany's central bank on Monday said that economic growth in the country will likely remain stagnant through the third quarter.

Growth has remained flat in Europe's largest economy since the spring after recovering from a brief two-quarter technical recession over the winter months.

The German Bundesbank said in its latest monthly report that economic output would remain largely unchanged into the autumn.

The Frankfurt-based central bank, however, forecast inflation in Germany to continue declining in the coming months due to falling energy prices.

An energy price shock last year caused by the fallout from Russia's invasion of Ukraine caused an energy crisis in Germany and helped fuel surging inflation globally.

The Bundesbank's latest report said private consumption will likely be strong in Germany due to stable employment figures, strong wage growth and lower inflation. However, weak foreign demand for German goods will likely continue to weigh on industrial production in Germany's export-oriented economy.

In addition, the Bundesbank said higher interest rates have dampened demand in the construction sector and for capital goods.

Weak foreign demand combined with higher financing costs also weighed down Germany's economy in the second quarter, thwarting hopes for a spring revival of Germany's sputtering economy, according to the Bundesbank.

Analysts at the central bank wrote that, although inflation will drop, strong wage growth will likely keep it above 2% over the longer term. The Bundesbank forecast 6% inflation in Germany for 2023overall and predicted inflation of 3.1% in 2024. — dpa

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