November 18, 2019 / 11:24 AM / a month ago

German economy to stagnate but no recession coming: Bundesbank

The financial district with Germany's Deutsche Bank and Commerzbank is pictured in Frankfurt, Germany, March 18, 2019. REUTERS/Ralph Orlowski

FRANKFURT (Reuters) - Growth in Germany, Europe’s biggest economy, will remain weak in the fourth quarter but there is no reason to fear a recession and there are signs that prospects for its vast industrial sector may be stabilizing, the Bundesbank said on Monday.

Germany escaped a recession last quarter with a better-than-projected 0.1% quarterly expansion but the figure is likely to have indicated stabilization and not a rebound as export-focused sectors continue to suffer.

“The slowdown of the German economy will probably continue in the fourth quarter of 2019,” the Bundesbank said in a monthly economic report. “However, it is not likely to intensify markedly. As things currently stand, overall economic output could more or less stagnate.”

A global trade war, China’s own slowdown and shifting consumer habits have pushed Germany’s industry into recession but the domestic economy has remained unexpectedly resilient.

Part of the explanation is that firms are retaining staff even during difficult times out of fear they would struggle to find skilled workers once the downturn passes.

“From today’s vantage point, there is no reason to fear that Germany will slide into recession,” the Bundesbank added.

The central bank also noted that there are some tentative signs of stabilization in industrial demand and said the domestic economy will probably continue to provide momentum.

“Because the labor market is likely to remain fairly robust and wages are expected to grow considerably, households’ income prospects should remain favorable,” it added.

Reporting by Balazs Koranyi; Editing by Catherine Evans

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