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Eurozone engine stalled? Germany sends signals of slowing economy
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Official Website]: Eurozone Engine Stall? Germany sends a Signal of Economic Slowdown". Hope it will be helpful to you! The original content is as follows:
Germany, as the economic core of the euro zone, has long led the regional economic development with its strong economic scale, outstanding industrial www.xmh100.competitiveness and important policy influence.
In 2024, Germany's GDP accounted for 28% of the total euro zone and its industrial output value accounted for nearly one-third. In global trade, the trade surplus in March 2025 reached 21.1 billion euros, and high-end manufacturing industries such as automobiles, machinery, and chemicals contributed more than 70% of exports. At the same time, in the field of energy transformation, Germany has invested huge sums of money such as the 500 billion euro special fund. In 2025, 40% of the funds in the Climate and Transformation Fund are invested in efficient construction and energy storage, striving to reshape economic www.xmh100.competitiveness. However, the data show that the German economy may be slowing down or even weakening.
Inflation data is stable on the surface, and there are hidden worries in sub-items
From the inflation rate, Germany's inflation rate in 2025 was stable at +2.0%, with the same data in June and July, before the previous period was +2.1% in May and April. Although it seems stable, in-depth analysis of its CPI sub-item data can reveal many hidden worries.
The rise in food prices squeezes the consumption space of non-essential products
As a necessity for residents' lives, food has a profound impact on the economy. Food prices rose 2.2% year-on-year in July 2025, slightly higher than the overall inflation rate and higher than the increase in June.
Fruit prices rose 7.6%, sugar, jam, honey and other candies rose 5.6%, and dairy and eggs rose 4.1%. The continued rise in food prices has led to an increase in residents' spending on food, which will undoubtedly squeeze the consumption of other non-essentials.
Ordinary families are buyingThe increase in spending when buying food may reduce expenditures on culture, entertainment, travel and vacation. This change in consumption structure is a negative signal for industries that rely on non-essential consumption, such as tourism, entertainment, culture and other industries, which means that the market demand in these industries may shrink, which will affect the revenue and expansion plans of enterprises, and ultimately drag down overall economic growth.
The decline in energy prices off-season suggests a slowdown in industrial activity
The prices of energy products fell by 3.4% in July 2025 www.xmh100.compared with the same month last year. It seems to have a positive effect on the economy, but the actual situation is relatively www.xmh100.complicated. Although the decline in energy prices slowed down for the third consecutive month, the decline in July weakened (June 2025: -3.5%), prices of automobile fuel (-4.5%), household energy (-2.6%) and other prices all fell year-on-year. Consumers benefited from the decline in prices of firewood, wood pellets and other solid fuels (-5.3%), heating oil (-5.0%), electricity (-2.0%) and regional heating (-1.8%), but the price of natural gas is slightly higher than a year ago (+0.3%).
July, the traditional peak season for electricity use in Germany, showed a downward trend in energy prices, which may suggest a slowdown in industrial production activities.
Because industry is a major energy consumer, the decline in energy prices may be due to insufficient industrial demand. If industrial production continues to be sluggish, then the production capacity and exports of Germany's proud manufacturing industries, such as automobiles, machinery, chemicals and other industries, will be affected. Manufacturing is a pillar industry of the German economy, and its hindered development will inevitably have an impact on the overall economy.
The rise in wholesale prices increases the burden on enterprises and consumers
Looking at wholesale prices, the main reason for the year-on-year increase in wholesale prices in July 2025 is the increase in food, beverage and tobacco prices, with an average price increase of 3.5% www.xmh100.compared with July 2024 (-0.6% in June 2025).
The wholesale prices of coffee, tea, cocoa and spices are much higher than the same period last year (+16.0%). The prices of sugar, candy and baked products rose year-on-year (+15.0%), and the prices of meat and meat products (+9.4%), live animals (+8.4%) and milk, dairy products, eggs, and edible oils (+7.3%) also rose significantly.
The rise in wholesale prices will eventually be transmitted to the consumer side, further increasing the burden on consumers and curbing consumption. At the same time, for enterprises, the increase in raw material costs will www.xmh100.compress profit margins and affect the www.xmh100.company's investment and production enthusiasm.
The field of transportation and www.xmh100.communications may be affected by the economic atmosphere
In the field of transportation and www.xmh100.communications, although there is no direct data indicating that its prices or consumption have declined, some problems can be seen from the decline in energy prices.
Transportation prices are closely related to industrial production and logistics transportation. A decline in energy prices may mean a decrease in logistics transportation demand, reflecting a decrease in industrial production activity.
At the same time, the purchase of vehicles and other means of transportation is non-Consumption of essential goods, consumers may be less willing to consume durable goods such as cars when they face rising costs of living such as food. In terms of www.xmh100.communication services, if the economy slows down, www.xmh100.companies and residents may reduce spending on www.xmh100.communication services upgrades and other aspects. Businesses may reduce subscriptions to high-end www.xmh100.communication packages, and residents may postpone the replacement of new smartphones, which will affect the development of the www.xmh100.communications industry and in turn affect economic growth.
To sum up, from the continued rise in food prices to squeeze consumption of non-essentials, to the decline in energy prices that suggest slowing industrial activity, to the negative impact of rising wholesale prices on businesses and consumers, and the possible impact of areas such as transportation and www.xmh100.communications, it can be speculated that the German economy may be facing pressure to slow down. If these trends continue, the weakening trend in Germany's economy may further intensify, and the government and relevant departments need to pay close attention and take effective measures to respond.
At the same time, the "contradictory" between the slowdown in Germany and the strengthening of the euro is essentially the result of a game between short-term data weakening and long-term policy expectations, global capital flows, and improvement of the external environment. Fiscal stimulus plans, monetary policy differentiation, easing trade tensions and energy transformation dividends have jointly promoted the appreciation of the euro, while structural problems of the German economy (such as weak industrial and food inflation) have been temporarily "ignored" by the market. In the future, if fiscal policy is implemented less than expected or trade frictions restart, the euro's rise may reverse. Therefore, it is necessary to dynamically observe policy effects and data corrections rather than statically www.xmh100.compare economic indicators and exchange rate trends.
The above content is all about "[XM Forex Official Website]: Eurozone Engine Stalls? Germany Releases Signals of Economic Slowdown". It was carefully www.xmh100.compiled and edited by the XM Forex editor. I hope it will be helpful to your transactions! Thanks for the support!
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