Tuesday 18 June 2019 8:17 pm

German think tank says receding manufacturing sector damaging growth

A German think tank today said the country’s export-oriented manufacturing sector, which is at the heart of its economy, “is in recession”.

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The Ifo Institute reaffirmed its prediction that Europe’s biggest economy will expand by just 0.6 per cent in 2019, saying growth will be driven by consumer spending and construction.

It became the latest forecaster to issue a gloomy account of Germany’s struggling economy.

Late last month the Organisation for Economic Co-operation and Development (OECD) said Germany’s economy would grow by just 0.7 per cent in 2019.

New car emissions tests have been blamed for hurting output in the country’s key automobile sector while low water in the river Rhine is said to have damaged production at chemicals factories.

The respected Ifo Institute said the German economy will be driven by private consumer spending over the next few years. Ifo predicted it will increase by 1.4 percent in 2019 and by 1.3 percent in 2020.

“However, there are increasing signs that industrial weakness is gradually spreading to the domestic economy via the labour market and deep value chains,” said Timo Wollmershaeuser, head of Ifo’s economic forecasts.

Its prediction of a slightly weaker domestic economy has caused Ifo to lower its growth forecast for 2020 by 0.1 percentage points to 1.7 per cent. This number was boosted by an above-average number of working days in 2020, it said.

“Economic policies that attempt to change the globalised economic order through isolation, sanctions, and threats have increased uncertainty worldwide, cooled industrial activity, and caused world trade to collapse,” Wollmershaeuser said.