General economic and institution-specific conditions
International interest rate and monetary policy
Germany’s economy contracted in 2024 mainly due to weak industrial production and foreign demand, as well as consumers held back on their spending. The high level of interest rates continued to weigh on the building industry in general and home building in particular. Consequently, Germany’s gross domestic product (GDP) declined by 0.2% year-over year.1
The inflation rate generally subsided in the Eurozone over the course of 2024. The rate of increase tracked by the Harmonised Index of Consumer Prices (HICP) in the Eurozone fell from 2.8% in January 2024 to 1.7% in September. Towards the end of the year, however, consumer inflation began to pick up again. Consumer prices in December 2024 were 2.4% higher than in December 20232.
In line with the favourable trend of inflation, the European Central Bank (ECB) lowered its deposit facility rate in four steps from 4.00% in early June 2024 to 3.00% in December, after having left it unchanged since September 2023.
The ECB also announced that as of mid-2024 it will no longer completely reinvest the redemption proceeds from the securities purchased under its Pandemic Emergency Purchase Programme (PEPP) 2024 when they mature. This decision had the effect of reducing the PEPP portfolio by an average of EUR 7.5 billion per month. The reinvestment of redemption proceeds from the PEPP will be discontinued at the end of 2024.3
The U.S. Federal Reserve (the “Fed”) likewise eased its interest rate policy in 2024. The Fed lowered its base rate in three steps from a target range of 5.25% to 5.50% in September to a target range of 4.25% to 4.50% at the end of the year.4
The euro depreciated modestly against the US dollar during the course of 2024. At the end of 2024, the ECB set the reference rate for the euro-dollar exchange rate at 1.04, 6.3% below the rate at the end of 2023 (1.11).5
Development of long-term interest rates
Due to the high level of base rates, long-term interest rates trended up until the middle of 2024. In the second half of the year, the upward trend was dampened by the interest rate cuts of central banks. The yield of 10-year German Bunds rose to 2.39 % at the end of 2024, above the 2.03% level observed at the end of 20236.
Development of the economic environment for promotional activity
According to an estimate of the German Federal Agriculture Information Centre (Bundesinformationszentrum Landwirtschaft), German agricultural output declined modestly to EUR 75.4 billion in 2024, which was about 1% less than in the previous year. Whereas the output value of crop production fell by 2% to EUR 34.6 billion, the output value of livestock production rose modestly to EUR 36.0 billion.
Within the category of crop production, production values were generally lower due to weather conditions and price effects, particularly in the case of grain (-12%), thereof rye (-16%), and oilseeds (-15%), while the production value of fodder crops was only modestly lower (-1%).
In the category of livestock and livestock products, meat production increased in 2024, due in part to higher carcass weights. However, the increase in production output was offset by a somewhat greater decrease in producer prices. Due to rather tight supplies of raw milk, milk prices in particular rose above the level of the previous year in 2024, resulting in a higher production value for livestock products.7
As expected, the overall economic situation of agricultural enterprises was worse in the 2023/2024 fiscal year (1 July 2023 to 30 June 2024) than in the previous year, when the profits of agricultural enterprises reached an all-time high. The average profit of agricultural enterprises came to EUR 77,500, which was about 29% lower than in the previous year, particularly due to lower producer prices and higher input costs.8
The revenue of the German food industry was approximately EUR 230 billion in 2024, roughly the same as in the previous year, although exports were slightly higher. However, this increase was mainly driven by price effects.9
Electricity generation from renewable energy sources in Germany increased further in 2024, rising by 4% to 283.6 TWh. Onshore wind power generation accounted for the greatest share (40%), followed by photovoltaics (26%) and biomass (15%). The preliminary net increase in onshore wind power capacity was 2,558 MW in 2024, that being 4.2% more than in the previous year. The preliminary net increase in photovoltaics capacity was 16,179 MW, which was nearly 20% more than in 2023.10