trending Market Intelligence /marketintelligence/en/news-insights/trending/CdrWRONQKGs_oMp899yvxg2 content esgSubNav
In This List

German GDP growth revised downwards due to manufacturing, geopolitical woes

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


German GDP growth revised downwards due to manufacturing, geopolitical woes

Germany's economy is expected to expand 0.5% in 2019, down from the spring forecast of 0.8%, amid falling global demand for its capital goods exports and disruption in its auto sector, Germany's leading economic institutes said.

Expected GDP growth for 2020 was also revised downward to 1.1% from the 1.8% expansion predicted in the spring, according to the Joint Economic Forecast released Oct. 2 that was prepared by DIW Berlin, the ifo Institute, IfW, IWH and RWI.

"German industry is in recession, and this is now also impacting the service providers catering to those companies," said Claus Michelsen, head of forecasting and economic policy at DIW Berlin.

He said any growth would be due "primarily to the continuing positive spending mood of private households, which is being buoyed by good wage agreements, tax breaks, and the expansion of government transfers."

Uncertainties arising from U.S.-China trade tensions and Brexit both weigh on Germany's economic outlook. A "disorderly" Brexit would result in German GDP expansion being 0.4% lower than if there was an orderly exit, Michelsen said.

Germany is 'well-prepared'

The country's finance minister, Olaf Scholz, is confident Germany will be able to withstand an economic crisis and does not expect any potential crisis to be as severe as the 2008 recession, Reuters reported.

Germany is "well-prepared" to take on an economic crisis and would "be able to do everything that is necessary," Scholz told German public broadcaster ARD, Reuters reported. He said he did not foresee a severe downturn and expected improvement, though at a slower pace than previously anticipated.

Fitch Ratings expects Germany to enter into a technical recession in the third quarter, while data from market research firm GfK shows that consumers still see Germany at the risk of a recession.

Germany's purchasing managers' index fell to the lowest level since June 2009.