Bundesbank Monthly Report (Apr): German economy likely grew in Q1 but the Iran war weighs on the outlook for the current quarter

• "Increasingly positive impulses from the more expansionary fiscal policy are expected to take effect".
• "On the other hand, the effects of the war in the Middle East are expected to burden the German economy more broadly and noticeably".

Economy:

• Economic output in Germany is likely to have risen slightly in the first quarter of 2026.
• In terms of underlying trend, demand for industrial goods remained stable, but the outlook for industry has deteriorated.
• "Looking ahead to the second quarter, only a slight expansion is anticipated, at best".
• Inflation is likely to remain significantly elevated over the coming months. However, the duration and extent of the surge in inflation depend heavily on further developments in the Middle East conflict.