What is the appropriate exchange rate at which neither domestic nor foreign firms gain an unfair competitive advantage? A new study examines whether the estimation methods currently being used are conducive to answering this question. It turns out that this is often not the case.

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In the final quarter of 2022, real gross domestic product is likely to have more or less stagnated, and thus exceeded previous expectations,” the Monthly Report states. Although high inflation and uncertainty surrounding the war in Ukraine weighed on the economy, the situation in the energy markets eased markedly compared with the third quarter. This, coupled with the government covering advance payments for gas bills, led to a distinct weakening in consumer price dynamics in December. However, prices for non-energy components such as food and industrial goods continued to increase sharply, according to the report.

Having risen in the previous three quarters, households’ financial assets fell by €35 billion in the third quarter of 2023, standing at €7,467 billion at the end of the quarter. 

German economic output is likely to contract somewhat in the third quarter of 2023, the Bundesbank writes in its Monthly Report. It is unlikely that private consumption will offer any discernible positive impetus. Households are still reluctant to spend despite the slight easing in price inflation, strong wage growth and favourable labour market. In addition, weak industry is weighing on economic output. 

German credit institutions’ performance tended to deteriorate in 2022, Bundesbank experts write in the current issue of the Monthly Report. Profit for the financial year before tax did manage to creep up on the whole and, at €27.4 billion, remained well above the long-term average. However, this was driven mainly by a one-off effect at one institution. According to the Bundesbank, most categories of banks recorded significantly lower annual profit for the reporting year than in 2021.