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German Economic Trends To Remain Weak In Q2

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Germany's industrial activity is set to remain sluggish amid moderating foreign demand, and the service sector growth is likely to lose steam, suggesting that economic trends in the biggest euro area economy will be weak in the second quarter.

"After a surprisingly strong development of the German economy in the first quarter, the current economic indicators signal a subdued development in the second quarter," the country's Economy Ministry said in a monthly report on Monday.

In the first quarter, the German economy grew 0.4 percent quarterly, which was the first such increase in three quarters.

The Bundesbank said in its June monthly report that the economy would contract slightly in the second quarter as exports remain weak and the industrial downturn is likely to continue.

The bank downgraded its growth outlook for 2019 to 0.6 percent from 1.6 percent and that for next year to 1.2 percent from 1.6 percent.

The German manufacturing sector has not yet recovered entirely from the slump seen over the last year, that was mainly due to the sluggishness in the automobile sector.

The weak order situation and the gloomy business sentiment suggest that the lackluster climate in the industrial economy is set to continue, the ministry said.

Further, there are currently significant downside risks due to trade tensions, the Brexit process and geopolitical factors, the report said.

Citing the third consecutive monthly increase in underemployment, the economy ministry said the slowdown in the economy is beginning to affect the labor market and this trend is expected continue over the coming months.

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