Germany’s Economy to Stall for Remainder of the Year, Poll Shows

(Bloomberg) — Germany’s economy — still reeling from a winter recession — will barely expand in the second half of the year, according to a Bloomberg poll.

Having already stalled in the second quarter, economic output will stagnate again in the three months through September and then grow just 0.1% in the final quarter, the survey of economists — conducted Aug. 4-10 — showed. That’s down 0.1 percentage point from expectations for each period just a month ago.

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The economy is still predicted to contract 0.3% in 2023, and will likely only rebound by 0.8% in 2024, down from a previous prediction of 1%, the economists said. 

German industry is facing continued weakness amid poor demand from China, worker shortages, tighter monetary policy and the lingering fallout from last year’s energy crisis. Europe’s biggest economy is anticipated by the International Monetary Fund to suffer the only contraction among Group of Seven nations this year.

In a separate report published Monday, Germany’s Economy Ministry warned that a “generally expected recovery still failed to materialize in early summer.”

“In terms of the domestic economy, the expected cautious recovery in private consumption, services and investment is showing the first signs of hope, which are likely to strengthen as the year progresses,” it said. 

However, “the still weak external demand, the continuing geopolitical uncertainties, the still high rates of price hikes and the increasingly noticeable effects of monetary tightening are damping a stronger economic recovery,” according to the report. “Current leading indicators such as new orders and the business climate still don’t point to a sustained economic revival in Germany in the coming months.”

Against that backdrop, ZEW numbers due on Tuesday are likely to show that investor confidence toward Germany deteriorated again in August. 

What Bloomberg Economics Says…

“The German ZEW is the first of the major surveys to be released in the euro area for August, providing a hint of what to expect from the others. Investor expectations slipped further, suggesting sentiment was being weighed by high energy prices, rising interest rates and weaker global demand. Tighter credit conditions also means Germany won’t gain much momentum in the coming quarters.”

—For the full note, click here

—With assistance from Iain Rogers.

(Updates with Economy Ministry report starting in fifth paragraph)

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