German households will give the economy a boost this year, say DIW experts

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A woman holds money in her hand for a full shopping basket.  Patrick Pleul/dpa

A woman holds money in her hand for a full shopping basket. Patrick Pleul/dpa

Forecasters at the Berlin-based economic research institute DIW have upgraded their growth forecasts for Germany, with rising private consumption responsible for the rebound.

Growth in Europe’s largest economy is expected to reach 0.3% this year, DIW said on Friday. That is still modest, but an improvement compared to the institute’s previous expectation in March of 0.1%.

This rate is expected to rise to 1.3% in 2025.

DIW said households in Germany are likely to experience greater income security in the coming months, which should in turn boost overall economic activity.

DIW attributes this confidence to one-off payments by employers – including inflation compensation bonuses – and wage increases, some of which have not yet taken full effect.

“All signs point to green for private consumption, which should become the main driver of growth,” says DIW economic forecaster Geraldine Dany-Knedlik.

Low-income households probably also have higher incomes available, according to the DIW experts.

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