German Economy Sees Q1 Growth but War Clouds Outlook

Germany’s central bank, the Deutsche Bundesbank, said the country’s economy likely recorded modest growth in the first quarter, supported by solid industrial output and resilient services activity. Despite weakening consumer confidence toward the end of the quarter, exports and business-related services helped sustain overall momentum.

However, the outlook for the second quarter remains fragile as the ongoing Iran conflict begins to weigh more heavily on Europe’s largest economy. The war has pushed up energy prices, disrupted supply chains, and increased uncertainty, all of which are expected to dampen growth. The Bundesbank cautioned that only slight expansion is likely in the near term, even as government spending aims to support recovery.

Rising fuel costs have already eroded household purchasing power, weakening private consumption further. In addition, softer global demand and cautious business sentiment are expected to impact exports and investment. While fiscal measures may provide some support, escalating geopolitical risks continue to pose significant challenges to Germany’s economic outlook.

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