With the quarrels in the traffic light coalition and their eventual end, uncertainties have increased further in the second half of 2024. Private consumers and above all investors continue to hold back. Following the Federal Statistical Office’s revisions of the first estimates for real gross domestic product (GDP) in the 2nd and 3rd quarters downwards by a total of 0.3 percentage points, the GDP level for 2024 has also decreased, with the result that the Hamburg Institute of International Economics (HWWI) has lowered its growth forecast for 2024 from +0.2% to -0.2%. The further economic outlook is also overshadowed by geopolitical uncertainties. After the “traffic light phase-out”, new elections are scheduled for February 2025, and a revival of economic momentum must be high on the agenda of the next government. It will take a certain amount of time before a government is formed, and economic policy measures will therefore only be implemented with some delay. But then, from around the middle of 2025, the current lethargy in the German economy and the weak investment of companies could gradually be overcome. Until then, only private consumption is likely to support the economy. In addition, monetary policy easing should gradually contribute to stabilisation.

Under these conditions, the HWWI expects economic growth of 1/2 % for 2025 and 1 1/2 % for 2026. The inflation rate for consumer prices temporarily fell below the stability mark of 2% in late summer 2024. However, this was initially due to base effects and lower fuel prices. Recently, however, it has risen again to 2.2%. The so-called core rate of 3% and significantly higher labour costs continue to signal some inflationary pressure. Inflation rates are expected to remain slightly above 2% in the coming months before inflation is expected to stabilise at 2% from mid-2025. The uncertainties resulting from the new elections, as well as the uncertain future, rather protectionist trade policy of the USA and the ongoing geopolitical conflicts, contain some imponderables for these forecasts.