Germany faces a recession



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Germany is in recession and its economy will hardly grow this year, according to a Bloomberg survey.

Gross domestic product will contract 0.1% in the first quarter, the March 8-14 poll showed. A month ago, analysts were predicting stagnation in the first three months of the year.

The Bundesbank has also highlighted that Germany is probably in a six-month slump, though it’s made a point of saying a severe downturn is unlikely.

Similarly, the Economy Ministry said most research institutes “expect GDP to fall again in the first quarter of 2024.”

“Despite positive trends in industrial production, construction and foreign trade at the start of 2024, a noticeable economic recovery isn’t yet in sight,” it said Friday in its monthly report. “This is due to continued weak domestic demand, high financing costs and the still subdued sentiment among private households and companies.”

Respondents in the Bloomberg survey also reduced their forecast for 2024 as a whole, now seeing growth of just 0.1%.

That’s in line with the Economy Ministry’s warning that “a noticeable economic upturn isn’t expected until later in the year as inflation rates continue to fall, wages and incomes rise, the labor market remains stable and impetus from foreign trade increases.”

Data due this week may bolster sentiment a touch. The ZEW expectations survey on Tuesday and the Ifo business climate index on Friday are both predicted to improve.

“The German economy is facing enormous challenges,” FrontierView’s Martin Belchev told Bloomberg. “It lost cheap energy from Russia, flourishing sales markets in China and an almost free security guarantee from the US.”

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