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Ifo Says Free-Fall In German Industry Stopped

The free-fall in German industry has stopped, ifo economic institute said in its winter forecast published on Thursday.

Gross domestic product is forecast to grow 0.5 percent in 2019. Another contraction in the economy is unlikely and the GDP is set to grow 0.1 percent in the fourth quarter of 2019, the institute estimated.

The German economy remains divided, Timo Wollmershaeuser, head of forecasting at Ifo, said. Whereas the value added by service and construction companies that focus on the domestic market continues to rise, the manufacturing industry remains caught in recession.

The industry will probably deliver a negative contribution to growth next year but would be much lower than in the current year, the think tank noted.

The recent order intake, business expectations in the manufacturing sector, and the increase in October exports suggest that the free-fall has stopped and gradually light is emerging at the end of the tunnel.

GDP growth is forecast to improve to 1.1 percent next year and 1.5 percent in 2021.

The think tank expects the jobless rate to fall to 5 percent in 2019, 4.9 percent in 2020 and to 4.8 percent in 2021.

Further, the inflation rate is projected to rise from 1.4 percent this year to 1.6 percent in 2021.

ifo said economic momentum in the Eurozone is not expected to get any worse but it will take several quarters before there is a tangible recovery. The single-currency bloc is projected to grow 1.2 percent both this year and next, followed by 1.3 percent in 2021.

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