'High likelihood' Germany goes into recession, research center warns

By Economic IndicatorsFOXBusiness

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Germany is in danger of a recession, a Munich-based economic research center said on Tuesday.

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The Ifo Institute lowered its economic growth forecast for the country for 2019 from 0.6% to 0.5%.

"The German economy is at risk of falling into recession. Like an oil slick, the weakness in industry is gradually spreading to other sectors of the economy, such as logistics, one of the service providers,” Timo Wollmershaeuser, Ifo's head of forecasts, said in a statement. "This outlook is associated with high uncertainties. For example, we are assuming that there will be no hard Brexit or escalation of the US trade war."

Germany is Europe's biggest economy, followed by the United Kingdom and France.

Germany would be in a recession should its economy contract by 0.1% in the third quarter as Wollmershaeuser predicted. Its economy already contracted by 0.1% in the second quarter. The institute forecasts a recovery in the fourth quarter that would bring about growth of 0.5 percent for the year overall.

In this picture taken Aug.7, 2018 containers are located at the container terminal Tollerort in the port of Hamburg, Germany. (Axel Heimken/dpa via AP) (AP)

Wollmershaeuser also highlighted Germany's unemployment numbers, saying they show the economy's "weakness." Unemployment has risen for the fourth consecutive month, and Ifo expects unemployement to rise to 2.313 million in 2020 from 2.275 in 2019. But the institute also expects employment numbers to go up.

Ifo's numbers went public hours before the European Central Bank cut rates deeper into negative territory.

"Overall, there is a high likelihood that the German economy will slide into recession," Ifto said.

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NatAlliance global fixed income head Andy Brenner discussed Germany's economy with FOXBusiness in late August.

"Germany is in terrible shape with negative GDP this week, and with their expectations looking for another negative GDP in the third quarter, the Germans are going to be forced to open up their pockets and do fiscal stimulus," Brenner said.

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