Germany faces brief recession but slow recovery

By Cirsten Pahlke and Paul Carrel

BERLIN (Reuters) - The German economy will likely slip into recession this year before stagnating and then show only anemic growth in 2009, a Reuters poll showed on Thursday.

The mid-range forecast in a Reuters poll of 16 analysts showed Europe's largest economy shrinking by 0.1 percent quarter-on-quarter in the third quarter of this year after contracting in the April-June period.

Contraction in the third quarter would push the economy into recession -- widely defined as two or more consecutive quarters of negative economic growth. The poll pointed to stagnation in the final quarter of 2008 and first three months of 2009. "We don't think we will fall into a deep recession, although the risks are on the downside there," said Alexander Koch, economist at UniCredit in Munich. "We don't see anything rescuing the economy and generating a fast and lasting recovery in the coming months."

For 2009 as a whole, the poll pointed to annual gross domestic product (GDP) growth of 0.1 percent after 1.7 percent this year. A similar Reuters poll conducted in July saw growth next year of 1.2 percent.

The economic outlook in Germany, as in other leading economies, has deteriorated sharply due to the financial crisis.

The crisis hammered German investor morale in October, a closely watched survey by the ZEW economic research institute showed on Tuesday. In September, German corporate sentiment deteriorated to its lowest level since May 2005.

In a sign companies are suffering from a weaker global economy, carmaker BMW said last Friday it would temporarily halt output at some German plants given the sharp drop in demand in key car markets.

German consumer price inflation would cool in the first half of next year, the poll showed, slowing to 1.9 percent for 2009 as a whole from 2.8 percent this year.

Fears about inflation have led Germans to hold down their spending and raise their savings rate, which has risen to more than 10 percent of disposable income.

As inflation cools, household spending should pick up. The poll pointed to a 0.5 percent increase in private consumption for 2009 as a whole after a decline of 0.5 percent this year.