German economic outlook 'somewhat brighter' - Bundesbank

The outlook for the German economy has brightened slightly, the Bundesbank said on Monday, after energy prices eased.

Publishing its latest monthly report, Germany's central bank said the economic outlook was "somewhat brighter". Economic output is still expected to decline "slightly" during the year, it noted, but was likely to now perform "a little better" than expected at the end of 2022.

In its December report, the bank forecast the economy would contract by 0.5% in 2023.

It continued: "At the turn of year, sentiment among entrepreneurs and consumers worldwide brightened slightly, with recessionary fears receding somewhat. This is likely to have been helped by the distinct easing of the European energy crisis. Inflationary pressures also slackened somewhat.

"Ultimately the end of the zero-Covid policy in China is likely to pave the way for economic recovery."

Looking to the current year, the Bundesbank said it expected lower energy prices to further dampen inflation, with a fall in producer prices for intermediate goods in the manufacturing sector also likely to curb price inflation for goods.

However, the Bundesbank also cautioned: "The underlying inflationary pressures may prove to be more persistent given the robust labour market situation and high wage growth."