German economy turns underperformer with outlook cut

By BLOOMBERG

BERLIN • The German economy is turning into Europe’s underperformer, with the government now predicting 2019 will see the weakest expansion in six years.

Amid slowing global momentum and concerns over Brexit and trade disputes, the Economy Ministry yesterday cut its estimate to 0.5%, half the pace previously forecast.

It’s the latest in a series of downward revisions from a 2.1% projection a year ago. Growth for next year is seen at 1.5%.

While there’s been a small improvement in business confidence, manufacturing in Germany remains mired in a deep slump.

Based on European Commission forecasts for the rest of the euro-area, the government’s latest prediction would leave Germany as the region’s worst performer this year, bar Italy, which is stagnating.

“We think the risks to these forecasts are skewed to the downside. That’s because, just as the worst of the storm seemed to have passed, fresh gloom has now appeared on the horizon.

“The manufacturing Purchasing Managers’ Index plummeted in March — to levels not seen since the euro-area’s sovereign debt crisis — and factory orders plunged in February as well,” said Jamie Murray, Bloomberg’s chief European economist.

The International Monetary Fund last week cut its global growth outlook on indications higher tariffs are weighing on trade.

Economy Minister Peter Altmaier said in an emailed statement that the “current weak phase in Germany’s economy must be a wake-up call”.

The extent of the slowdown has prompted appeals for Germany to use its financial cushion to boost spending.

Altmaier said Germany is investing into infrastructure, education and research at record levels.

The chancellor’s spokesman, Steffen Seibert, earlier this week denied the need for a package of measures to boost growth. — Bloomberg