The German economy is “in good shape overall,” the head of the country’s central bank or Bundesbank said on Wednesday, waving away suggestions that clouds could be building over Europe’s biggest economy.
Speaking at the Bundesbank’s annual news conference, president Jens Weidmann pointed to record high employment last year and falling unemployment. “While wage growth was marked, inflation remained subdued. This led to a distinct rise in real disposable income,” Weidmann said.
Private consumption was the main engine driving the economy last year.
Ansd “this year, too, will probably see brisk domestic demand fuelling economic activity, which looks set to remain on a clear upward trajectory in 2016 despite the slight upturn in risk,” Weidmann said. His comments came as recent economic data point to a possible slowdown in German growth and falling confidence.
The day before, the widely-watched Ifo business climate index fall to its lowest level in 14 months as business leaders became increasingly unsettled by the recent financial market turmoil.
Turning to the eurozone as a whole, Weidmann said the outlook there, too, was “rosier.”
“The euro area’s gradual economic recovery is likely to continue in the rest of this year and in 2017,” Weidmann said.
And he warned of the possible risks of further stimulus measures by the European Central Bank at its next policy meeting in March.
With the ECB’s monetary policy stance “already highly accommodative,” additional action “could entail longer-term risks and side-effects …that it would be dangerous to simply ignore,” Weidman cautioned.
In the face of stubbornly low inflation, the ECB is expected to roll out further measures next month to push area-wide inflation back up to levels more conducive to healthy economic growth.