October 4, 2018 / 8:04 AM / 15 days ago

Investments are weak spot for German economy: banking association

BERLIN (Reuters) - A significant slowdown in private investment is a weak spot for the German economy, the BdB banking association said on Thursday, slightly lowering it 2019 growth forecast for Europe’s largest economy on trade frictions and weak emerging markets.

The skyline of the financial district is seen in early evening in Frankfurt, Germany, September 30, 2018. Picture is taken on slow shutter speed while zoomed. REUTERS/Kai Pfaffenbach

The association said it expected the economy to grow by 1.8 percent, down from a previous estimate of 1.9 percent. The BdB expects a growth rate of 1.9 percent this year.

“Given the escalating trade conflict and the difficulties facing some emerging countries, the world economy faces the threat of sliding toward dangerous territory,” BdB Managing Director Christian Ossig said in a statement.

“We assume that the risks will remain manageable,” he said, adding that the German economy should remain stable despite growth rates lower than last year’s 2.2 percent.

The German economy has been relying on private consumption and government spending for growth as exports weaken. The services sector has been providing a cushion against slowing manufacturing output.

The German government last month also lowered its growth forecast for this year to around 2.0 percent, saying companies were not investing enough to achieve higher growth rates because they lacked skilled workers to increase their output.

“Judging by the profits of companies, high capacity utilisation, persistent economic growth and very low interest rates, investments should have increased much more strongly,” Ossig said.

The BdB has also lowered its forecasts for private investments in machinery and construction for both 2018 and 2019. It expects investments in machinery to grow by 3.1 percent next year, down from a previous forecast of 3.6.

It said the European Central Bank needed to put an end to its negative interest rate policy.

Reporting by Joseph Nasr; Editing by Michelle Martin and Jon Boyle

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