The worsening of the business climate in the US is having an impact on German investment. In spite of high expectations early this year, the euro-area economy did not accelerate after the first quarter. Among the reasons for this are oil prices, the considerable turbulences on financial markets and the looming threat of a military conflict.
Both factors continue to be among the downside risks to the economy. Nevertheless, the ECB Governing Council expects growth rates to pick up and to return to potential in the course of 2003. Private consumption might benefit from rising real income due to lower inflation rates.