Considering “the difficult economic situation in some euro-area countries and widespread uncertainty, economic growth will be lower than previously assumed,” the Bundesbank said.
Germany’s gross domestic product is likely to expand by only 0.4 percent next year, the bank said, down from its June forecast for 1.6 percent growth.
The bank did sound an optimistic note, saying that G.D.P. stood to rise by 1.9 percent in 2014 “if the euro-area banking and sovereign debt crisis does not escalate further and uncertainty among investors and consumers gradually subsides.”
Reinforcing the Bundesbank’s pessimism, a report Friday from the Economy Ministry in Berlin indicated that industrial production at German factories tumbled by 2.6 percent in October from September, and 3.7 percent from a year earlier.
“The German decoupling from the rest of the euro zone has come to an end,” Carsten Brzeski, an economist in Brussels with the commercial bank ING, wrote in a research note. “Strong trading ties with non-Eurozone countries had shielded the economy against the euro crisis. Now, with the global economic cooling in the second half of the year, this immunity is quickly fading away. The thinning out of order books throughout the year is finally feeding through to the real economy.”
The euro zone as a whole is already in recession, with the currency bloc’s G.D.P. falling in the third quarter by 0.1 percent from the April-June period, Eurostat, the statistical office of the European Union, said Thursday. That was a second consecutive quarterly decline — the textbook definition of the onset of a recession.
Despite the current malaise, “the sound underlying health of the German economy suggests that it will overcome the temporary lull without major damage to the employment, in particular,” the Bundesbank president, Jens Weidmann, said in a statement.
Germany’s unemployment rate was 5.4 percent in October, according to Eurostat. That was well below the euro zone rate for that month of 11.7 percent, a record.
And yet, Mr. Weidmann issued a warning Friday: “The balance of risks is on the downside. If global economic growth falls short of expectations or the debt crisis intensifies in some countries, growth will probably fall below the baseline assumption.”
Recent data have indicated that even with a calming of markets after long months of crisis, Europe remains in a rut. Eurostat said Wednesday that euro zone retail sales fell 1.2 percent in October from September, a sign that the limping job market is holding back economic activity.
The Bundesbank forecast came a day after the European Central Bank offered a much gloomier outlook for the 17-nation euro zone. The E.C.B. president, Mario Draghi, said the bank now expected 2013 growth of no more than 0.3 percent, weaker than its previous forecast for 0.5 percent growth.
Article source: http://www.nytimes.com/2012/12/08/business/global/german-central-bank-cuts-countrys-growth-forecast.html?partner=rss&emc=rss
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