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Ifo Istitute: German industry suffered setback in 2018

This is the press release from the Ifo Institute, leading German think-tank:


The German economy cooled down significantly in 2018. Economic output rose by 1.5 percent in price-adjusted terms, after a rise of 2.2 percent in the boom year of 2017. It stagnated in the second half of 2018 compared with the first six months. "The main reason for the slowdown was the weak rise in value added in German industry, which suffered from the global economic turbulence of last year," said Timo Wollmershaeuser, Head of Ifo Business Cycle Research and Economic Forecasting. "The uncertainties surrounding the reintroduction of tariffs, the outcome of the Brexit negotiations and the new Italian government's budget plans have left deep scars on Germany's key sales markets. But homemade problems, especially related to new emission standards in the German automotive industry, also dampened the economy," Wollmershaeuser added. Thus the driving forces behind the boom in the German economy in 2017 have faded. Exports of goods and services increased only weakly by 2.4 percent in 2018.

This year, the economy is likely to grow somewhat more strongly than in the second half of 2018. Domestic economic drivers remain sound. At the same time, wage increases, reductions in income taxes and social security contributions and expansion of transfer payments are likely to lead to a significant increase in household income. This will bolster private consumption and the construction industry, which will remain buoyant due to low-interest rates. Overall, however, economic growth this year is likely to be lower than in 2018, leading to a downturn in the German economy.


 

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