The Bundesbank says the German economy is slowly recovering after a weak two years, boosted by rising private consumption and more exports in the second half of the year, Bundesbank President Joachim Nagel said on Friday.
"Private households are benefiting from sharply rising wages, gradually falling inflation and the stable labour market," Nagel said of the central bank's latest half-yearly economic forecast.
Germany produced growth of a minimal 0.25% in the first quarter, thanks to exports and increased construction investment.
But for the whole of 2024, the Bundesbank expects German economic output to grow by 0.3%.
Back in December, real gross domestic product (GDP) was still forecast to grow by 0.4%.
The central bank's economists expect slightly stronger growth of 1.1% in the medium term, in 2025 and 1.4% in 2026.
The rate of inflation in Germany is continuing to fall, though somewhat more slowly. The Bundesbank expects 2.8% inflation this year and 2.7% in 2025, based on the Harmonized Index of Consumer Prices (HICP), the eurozone and European Union measure of inflation.
That is marginally higher than the Bundesbank's December calculations of 2.7% for 2024 and 2.5% in 2025.
The Bundesbank's inflation forecast for Europe's largest economy for 2026 remains unchanged at 2.2%.
"Energy and food prices in particular are easing considerably this year," the bank said. "However, inflation is proving to be stubborn, especially in services. The sharp rise in wages and the resulting cost pressure are playing an important role here."