Deutsche Bank expects the German economy to contract this quarter after recent business surveys pointed to souring moods at companies and their worsening expectations for new orders.
“The start of the German economy into 2019 has been a major disappointment so far,” Deutsche Bank economists including Sebastian Becker wrote in a report on Tuesday. “The development of several key cyclical indicators is telling us that the German economy is drifting towards recession right now.”
The warning from Germany’s biggest bank comes just days after Bundesbank President Jens Weidmann said economic weakness carried into 2019 and will result in significantly lower growth than predicted just a few weeks ago. The government in Berlin also recently cut its 2019 outlook almost in half and IHS Markit’s January survey showed manufacturing in Germany shrank for the first time in four years.
Deutsche Bank economists have refrained from revising their 1 per cent growth forecast for this year as they wait for the German statistics office to release the fourth-quarter data on February 22. In its first assessment last month, the office said Europe’s largest economy dodged recession with a “slight” increase in gross domestic product.