German Economy Heads for Worst Growth in Six Years

(Bloomberg) -- Go inside the global economy with Stephanie Flanders in her new podcast, Stephanomics. Subscribe via Pocket Cast or iTunes.

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 on Wednesday cut its estimate to 0.5 percent, half the pace previously forecast. It's the latest in a series of downward revisions from a 2.1 percent projection a year ago. Growth for next year is seen at 1.5 percent.

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.

What Bloomberg's Economists Say

“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 PMI plummeted in March -- to levels not seen since the euro-area's sovereign debt crisis -- and factory orders plunged in February as well.”

--Jamie Murray, Chief European Economist
Click here to view the research

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.

--With assistance from Zoe Schneeweiss, David Goodman and Andrew Blackman.

To contact the reporter on this story: Arne Delfs in Berlin at adelfs@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Raymond Colitt

©2019 Bloomberg L.P.