Economic Buzz: German economy likely to lose momentum temporarily in third quarter of 2026

German central bank stated in a latest update that the German economy is likely to lose momentum temporarily in the third quarter of 2026. Following a significant increase in the previous two quarters, real GDP in the current quarter. In general, however, the German economy will not stray from its path to recovery. This is because the slower pace largely stems from temporary stress factors. Catch-up effects should come into play once these factors subside. In particular, the Rhine's low water levels are putting the brakes on activity in the current quarter. This was already reflected by weak industrial output in July. Exports are also expected to make a smaller contribution to growth in the third quarter. In addition, private consumption is likely to remain subdued. Yet overall, the German economy has remained fairly resilient to elevated energy prices and supply chain problems to date. This is also reflected by the ifo and S&P Global sentiment indicators for German industry, which improved significantly in July and August. The easing of fiscal policy is creating additional impetus. This should also provide a sustained boost to the construction sector, in particular civil engineering. However, higher interest rates and rising construction costs are dampening household demand for construction work.

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