BERLIN, May 15 (Xinhua) -- The German government warned on Friday that economic growth would slow sharply in the second quarter, as escalating tensions in the Middle East drive up energy costs, disrupt supply chains and erode confidence across Europe's largest economy.
The warning came after a stronger-than-expected first quarter and was outlined in a monthly report of the German Federal Ministry for Economic Affairs and Energy, which cautioned that "rising prices, supply chain disruptions and heightened uncertainty were increasingly undermining confidence among businesses and consumers."
The ministry said the economic outlook depended heavily on geopolitical developments in the Middle East, adding that even if tensions were to ease, the impacts on energy and commodity prices as well as supply chains would likely persist for some time.
Since tensions in the region escalated in late February, the resulting rise in energy costs and supply disruptions have increasingly fed through to German consumers. Inflation accelerated to 2.9 percent in April, its highest level since January 2024, while energy prices surged 10.1 percent year-on-year. Food price inflation also picked up markedly during the month.
"The overall sentiment has deteriorated noticeably again in recent weeks and points to a significant weakening in consumer activity in the second quarter," the ministry said.
The assessment contrasted with the first quarter, when private and public consumption were among the main drivers of a 0.3-percent economic expansion, according to preliminary figures by the Federal Statistical Office.
The German government also flagged persistent weakness in the industrial sector as a drag on the economic recovery.
Factory orders rose in March, but the ministry cautioned the gain was partly inflated by front-loading linked to Middle East tensions. Industrial production has now contracted for four consecutive quarters, and the latest sentiment indicators offered no sign of a rebound in the second quarter, it said. ■