German gov't does not expect "pronounced recession"

Saturday, 2019-09-14 09:56:48
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The German construction industry still runs at "high speed". (Photo for illustration)
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The German economy is in a phase of weakness, the Federal Ministry for Economic Affairs and Energy (BMWi) said on September 13.

However, "a stronger downturn or even a pronounced recession is currently not to be expected," noted the ministry.

After a "good start" to the current year, with a 0.4 percent increase in gross domestic product (GDP) in real terms, the country's overall economic output weakened by 0.1 percent in the second quarter, the ministry stated.

For the third quarter of 2019, the Ifo Institute for Economic Research expects another decrease of 0.1 percent, followed by a "slight recovery" in the fourth quarter, which would result in a 0.5 percent growth rate for the entire year.

Germany would only be in "technical recession," said Claus Michelsen of the German Institute for Economic Research (DIW). "But thanks to strong consumption and the good labor market situation, this will not turn into a crisis in the short term."

"The export-oriented German industry continued to suffer from declining world trade and stagnating global industrial trends," according to BMWi. Especially exports to the European Union and Britain "declined noticeably" in the second quarter.

According to the Ifo institute, export expectations improved only slightly in August and the majority of German companies would not anticipate any growth in exports in the coming months.

Although the German construction industry would still run at "high speed," the phase of weakness of the industry and the energy sectors would continue, the German Economic Affairs Ministry stated.

However, private consumer spending remained an "important pillar" of domestic economic development. After a "very significant increase" of 0.8 percent in the first quarter, consumer spending rose by a further 0.1 percent in the second quarter.

Employment growth on the German labor market has been slower due to the economic situation, and the decline in the overall low unemployment rate has not continued recently.