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Bundesbank: No reason to fear that Germany would slide into recession

  
Analysis, Economy
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Comments by the Bundesbank in its latest monthly report

Germany
  • Domestic economy will probably continue to provide momentum
  • Manufacturing downturn could be leveling off
  • The slowdown is not likely to intensify markedly
  • The slowdown will probably continue in Q4 2019
  • The overall economic output could more or less stagnate
I think the thing that stands out the most for me here is the way that they are communicating the message rather than the message itself.
Take note of the words used: probably, likely, could. Now, that’s not exactly what I would call exuding confidence, not even the slightest. It sort of contradicts their main statement of having “no reason” to fear a recession.

Bundesbank sees risk of the German economy entering a recession

  
Analysis, Economy
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Comments by Bundesbank via its monthly report

Germany
  • Euro area economy growing at a subdued pace in Q3
  • Sees first signs of downturn in the labour market
  • German economic outlook remains unclear, hinges on exports
  • Economic activity could shrink over the summer (Q3) due to weak industrial activity
  • It is unclear if exports will regain their footing before the domestic economy becomes more severely affected
Given the way things are going, another economic contraction wouldn’t be surprising.
As mentioned over the last few weeks, the dichotomy of Germany’s economy (manufacturing and services performance) will eventually settle on one path and the likelihood of negative spillovers from the manufacturing to services sector grows with each passing day.
Thursday’s PMI data may give us a glimpse of that but lawmakers and policymakers will be certainly be hoping that the services sector will continue to bolster the economy through these tough times.
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