Bundesbank Expects German Economy to Stagnate in 2Q
20 May 2019 - 8:29PM
Dow Jones News
By Tom Fairless
FRANKFURT--Germany's economy is likely to stagnate in the
current quarter as the nation's large manufacturing sector wrestles
with a downdraft in global demand, the German central bank
said.
The downbeat assessment of Europe's largest economy contrasts
with relatively solid first-quarter growth data published last
week, which showed a 0.4% expansion in the three months through
March, driven by vibrant private consumption and a booming
construction sector.
The Bundesbank warned Monday, however, that the first-quarter
rebound was due mainly to one-off factors that are likely to lapse
or even reverse. They include government stimulus measures, a
temporary recovery in car purchases and brisk construction activity
as a result of favorable weather conditions, the central bank wrote
in its monthly report.
"German economic output in the second quarter of 2019 is not
very likely to exceed the level reached in the first quarter, which
had been boosted by a number of one-off effects," the report said.
"Downturn forces continue to be prevalent in industry, and they may
even intensify somewhat."
Germany's export-focused economy unexpectedly emerged alongside
Italy as one of Europe's economic laggards in recent months,
despite a strong domestic economy that boasts the lowest
unemployment rate in at least three decades.
Economists blame the country's strong reliance on exports,
especially to China, which has made it particularly vulnerable to
the global trade tensions unleashed by the Trump administration.
Policy makers in Berlin say they fear the White House could soon
slap punitive import tariffs on German cars, as President Trump has
repeatedly threatened, which would deal a further blow to the
country's flagship export.
Still, even if the downturn in German industry is likely to
continue, more domestically-oriented sectors are likely to grow,
bolstered by the robust labor market and low interest rates,
according to the Bundesbank.
Write to Tom Fairless at tom.fairless@wsj.com
(END) Dow Jones Newswires
May 20, 2019 06:14 ET (10:14 GMT)
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