Germany’s central bank is warning that the country could be slipping into recession.
The Bundesbank said Monday that Europe’s largest economy “is probably set to remain lackluster in the third quarter of 2019.” It predicts that GDP “could continue to fall slightly.”
GDP for the three months ended June contracted 0.1% compared to the first quarter. A recession occurs when the economy shrinks for two consecutive quarters.
Germany is facing a host of economic problems that analysts have referred to as a “perfect storm.”
The country’s economy depends on exporters that sell goods to China and the United States, which are locked in a bitter trade war. Weak global auto sales have also hit German carmakers, while fears of a disorderly Brexit loom.
The Bundesbank said its gloomy outlook for GDP is “due mainly to the continued downturn in industry.” Current data show industrial production further contracting this quarter, it said. Last quarter, industrial output fell more than 5% compared to the previous year.
The central bank report is likely to increase pressure on Germany’s government to spend more to stimulate its economy. But that remains a tough sell in a country that’s notoriously wary of borrowing.
It also bolsters the case for the European Central Bank to take action when it meets in September.
Economists predict that the ECB will cut interest rates, which are already at historic lows. The ECB is also expected to signal it will restart a trillion-euro bond buying program designed to spur economic growth.
Germany is just one of several major global economies facing potential recessions.
The UK economy shrunk in the second quarter, and growth flatlined in Italy. Mexico just dodged a recession, and its economy is expected to remain weak. Data suggest that Brazil slipped into recession in the second quarter.