German economy to stagnate as labour market cools, tariffs loom
FRANKFURT, Nov 19 (Reuters) -The German economy is likely to stagnate in the last three months of the year as the labour market continues to soften and possible new trade tariffs loom, the country's central bank said on Tuesday.
Europe's largest economy unexpectedly grew, albeit only by 0.2%, in the three months to September but the Bundesbank said there was little to suggest this would continue as demand from abroad and investment both remained weak.
"All of the key demand components therefore currently offer little reason for a noticeable short-term recovery in the German economy," the Bundesbank said in its monthly report.
In addition, it warned "political demands for new tariff barriers pose considerable additional risks for international trade", a likely reference to the protectionist stance of U.S. President-Elect Donald Trump which could hit Germany's export-oriented economy hard.
A bleak domestic picture helps explain a shift in the Bundesbank's stance inside the European Central Bank from a laser-focus on fighting inflation to a greater emphasis on stimulating growth via lower borrowing costs.
High wage growth, until recently a source of worry about a potential new leg-up in inflation, had likely peaked in the third quarter at 8.8% for collective agreements and was now likely to be "noticeably lower", the Bundesbank said.
"In view of the long-lasting economic weakness and significantly lower inflation rates, it is to be expected that the upcoming wage negotiations will result in noticeably lower agreements than in the past two years," it said.
Reporting By Francesco Canepa
Editing by Christina Fincher
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
