(Bloomberg) -- Germany’s economy may already be in recession, but a severe economic slump looks unlikely as things stand, according to the Bundesbank.
Gross domestic product “could stagnate or decline slightly again” in the third quarter, after a surprise 0.1% contraction in the second, the central bank said Thursday in its monthly report. In August, it had expected a small increase between July and September.
“However, a recession in the sense of a significant, broad-based and long-lasting decline in economic output, is currently not expected,” the Bundesbank said.
The report comes on the heels of several pieces of bad news for Europe’s largest economy — including problems at automakers Volkswagen and BMW, Intel postponing a planned factory, and an unexpected plunge in investor sentiment.
Economists have already begun lowering their predictions for this year, with some now seeing stagnation or even another slight downturn. Germany was the only Group of Seven economy to contract in 2023.
“The German economy is still navigating choppy waters,” the Bundesbank said. It cited, among other factors, a “weak start” to the third quarter for manufacturing and construction, as well as disappointing household spending.
President Joachim Nagel said Wednesday that hopes for a pick-up in industrial activity in the second half have dimmed considerably, and consumer restraint is proving stubborn.
“Stagnation might be more or less on the cards for full-year 2024 as well if the latest forecasts by economic research institutes are anything to go by,” he said. New Bundesbank forecasts are due in December. In June, it saw growth of 0.3% for 2024.
Nagel said that “we should not talk our country down” as a business location. Even so, “that is not to say, of course, that we should not pinpoint weaknesses and resolutely tackle problems” — for example by cutting red tape.
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