The Bundesbank flagged that the labor market, which it had previously expected to sustain the post-pandemic recovery, is now also visibly weakening. Unemployment is already at its highest in four years, at 6.1 percent of the workforce, and a wave of layoff announcements in the manufacturing sector — most notably at automaker Volkswagen — has alarmed the political class and shaken consumer confidence.
“After many years of very favorable labor market figures, this deterioration appears particularly striking,” the Bank said, predicting a further decline in employment over the winter.
The Bundesbank dedicated a section of its report on the threat of trade tariffs by its largest export market, the U.S. It warned if the Trump administration went ahead with across-the-board tariffs as promised, Germany’s economy would “probably suffer considerably.” It saw a hit of between 1.3 and 1.4 percent to gross domestic product by 2027.
