In spite of ongoing strains and additional headwinds as a result of the war in the Middle East, real gross domestic product (GDP) is likely to have increased slightly in the first quarter of 2026 after seasonal adjustment, the Bundesbank writes in the latest issue of its Monthly Report. Survey data for March indicate a stable situation, suggesting that the negative effects of the war in the Middle East will likely not play out until later in most cases. 

Industry has proven robust

In the case of industry, sales and exports of goods rose in January and February, pointing to positive growth. At the same time, the sector is suffering from structural barriers to growth, which are undermining its competitive position. On top of that, low capacity utilisation and more restrictive lending are dampening firms’ propensity to invest. Tighter credit standards for loans for house purchase, higher interest rates for building finance and poor weather in January and February hampered the construction sector. 

Private consumption faltered, too, after its strong finish in 2025. Consumers’ reticence could be partly down to the continued weakening of the labour market as well as the state of wage growth, which – while still strong – is slackening, the Bundesbank’s economists remark. They go on to point out that the significant rise in fuel prices due to the war in the Middle East also weighed heavily on households’ purchasing power in March. As things stand now, the Bundesbank expects these strains to hold private consumption back considerably in the current quarter as well. By contrast, the services sector is likely to have made a positive contribution to growth at the beginning of the year.

No signs of a recovery in the labour market

According to April’s Monthly Report, the slight decline in employment that has been ongoing for the past nine months continued in the first two months of the new year. The experts note that the latest leading indicators show no signs of a recovery in the labour market in the coming months. This is despite the fact that the war in the Middle East is unlikely to have had much of an impact on firms’ employment plans so far. In February, 2.98 million persons – in seasonally adjusted terms – were officially registered as unemployed. This equates to an unemployment rate of 6.3 %.

Further increase in energy commodity prices in April

Oil prices continued to rise in April as a result of the tense geopolitical situation in the Middle East, and they also exhibited greater volatility. The route through the Strait of Hormuz, which is key to global trade in oil and liquefied natural gas, remained under blockade. Against this backdrop, the price of crude oil fluctuated at a sharply elevated level in April. As the Monthly Report went to press, a barrel of Brent crude oil cost US$103, which is 46 % more than when the current conflict began.

Consumer prices went up substantially in March owing to marked rises in energy prices, especially for fuel and heating oil. The Harmonised Index of Consumer Prices (HICP) rose by 0.9 % on the month in seasonally adjusted terms, compared with 0.2 % in February. But prices for food and services also climbed in March. Annual headline inflation increased sharply from 2.0 % in February to 2.8 % in March, driven by higher energy prices, the Bundesbank’s economists write. They expect inflation to remain significantly elevated over the coming months. The duration and severity of the surge in inflation are going to depend on how the conflict in the Middle East unfolds.