Experts: German economy remains pessimistic

Pessimism of German investors can be explained by a series of negative indicators published since the beginning of August by the federal statistical bureau of the country. In June, industrial production decreased by 1.5% compared with May; the decline was 5.2% in annual terms. The slowdown affected all sectors of industry, except for construction - there was a slight increase of 0.3% after the recession in May and April. June exports fell 0.1% from 1.1% in May, dropping 8% from the same period last year. The country's trade balance in June fell to € 18.1 billion compared to € 18.7 billion in May. This data leaves no hope for economic growth in the second quarter: GDP is expected to decline by 0.1% compared with a growth of 0.4% in January – March. If the trend continues in the third quarter, Germany will face the first recession in six years.

The growth of negative trends will increase pressure on the federal government to mitigate fiscal policy. In 2018, the budget surplus amounted to € 58 billion, or 1.7% of GDP (the highest figure since the merger); by 2021 the public debt is expected to be reduced to 55% from the current 60% of GDP. However, analysts do not expect serious tax incentives under either the current or the next federal government, Capital Economics says. There are practically no possibilities for stimulating growth through monetary policy. ECB believes that one of the reasons for the further reduction in the negative deposit rate is the poor forecast for economy development "in countries where industry is very important."

source: capitaleconomics.com