KfW Business Cycle Compass Germany and Eurozone February 2019

Cyclical weakness continues; economic output will rise slightly at best in the first quarter. The year started with no momentum and the outlook for the global economy is less favourable, so KfW Research has significantly downgraded its economic forecast for the year 2019 to 0.8% (previous forecast: 1.6%). Real growth should pick up again to 1.8% in 2020 (initial forecast). But almost 0.4 percentage points of this is due to the changed position of public holidays in the calendar. Next year employees will work almost four days more than in 2019, providing an additional boost to economic output. The underlying cyclical momentum, however, will recover only slightly.

KfW Business Cycle Compass Germany February 2019(PDF, 186 KB, non-accessible)

In the course of 2018, economic performance in the monetary union slowed down significantly and the rapid deterioration in European business confidence at the start of the year is not good news. Even though one-off effects – such as the WLTP conversion – are subsiding, there are no signs of a vigorous recovery. Manufacturing, in particular, continues to suffer from the downturn in global activity and trade tensions.

KfW Research has therefore lowered its GDP forecast for 2019 to just 1.1%. The year 2020 should then see slightly more lively growth of 1.5%. However, our forecast is based on the assumption that none of the major downward risks materialises. In that case, a recession would probably be inevitable.

KfW Business Cycle Compass Eurozone February 2019(PDF, 189 KB, non-accessible)