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German Finance Ministry Warns Of Prolonged Industrial Weakness

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Germany's finance ministry warned on Monday that the weakness in the industrial sector and exports is set to last longer, mainly due to global risks such as the trade tensions.

"Leading indicators and falling orders indicate a persistently weakened industrial economy," the ministry said in its latest monthly report.

Meanwhile, the positive development in the labor market has continued, but slowed recently, and job creation is set to slow in the coming months, mainly in the manufacturing and trade sectors, the ministry added.

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.

In May, factory orders declined sharply as trade disputes weighed on foreign demand, while industrial production and exports recovered. However, economists said the rebound in production and orders do not signal an end to the downturn in the manufacturing sector.

Last week, the economy ministry said in its monthly report that 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.

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.

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.

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