German Central Bank reports slight growth despite war in Iran

Germany's central bank, the Bundesbank, reported on Tuesday that the German economy managed to achieve modest growth in the second quarter despite the headwinds caused by the war in Iran.

"Real GDP is likely to have risen slightly on a seasonally adjusted basis in the second quarter of 2026," the Bundesbank's monthly report for July said.

The Federal Statistical Office is scheduled to publish a preliminary estimate for growth in gross domestic product (GDP) for the period April to June 2026 on Thursday. Economists expect a 0.1% increase on the previous quarter.

The industrial economy is proving resilient, the Bundesbank's economists wrote, with companies benefiting from "dynamic foreign demand and growing exports."

German exporters may also have benefited from the fact that international competitors were more severely affected by bottlenecks in intermediate goods, the report said.

German consumers seem to have been relatively unfazed by rising energy prices and the associated losses in purchasing power: According to the Bundesbank's analysis, they appear to have kept their consumer spending at least stable.

However, the Bundesbank estimates that the inflation rate, which had fallen to 2.3% in June, is likely to rise again slightly in the coming months.

"A key factor here is that the fuel subsidy expired at the start of July," the report said. "Furthermore, the indirect effects of the recent surge in energy prices are also likely to gradually become apparent at the consumer price level."

The economists said future economic developments will depend largely on how the conflict between the US and Iran unfolds.