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German economy unlikely to pick up in early 2020, says Bundesbank

By Amanda Cooper

Manufacturing sector is stabilising but central bank sees no big change

The German economy is unlikely to pick up materially in the early part of 2020, as exports continue to suffer and the coronavirus hits Chinese demand, the Bundesbank said in a monthly report.

German economic growth slowed to 0.4 per cent in the final quarter of 2019, weighed down by the manufacturing industry, which has been in technical recession for a year.

Export orders, both from the eurozone and beyond, slid dramatically last year, as economic growth sputtered in the single-currency bloc and the trade war between the United States and China hampered global flows of goods.

“For the first quarter of 2020, there are still no signs of a fundamental economic change in Germany,” the central bank said in its monthly assessment of the economy.

There have been some signs of stabilisation, both in terms of factory activity and in demand for exports, the Bundesbank said.

"With regard to industry, the downward trend in incoming orders continued until the end of 2019, albeit with a further decrease in intensity," the report said. “However, the mood in this sector of the economy has visibly improved recently. This could indicate that the downward pressure on industrial production is gradually easing.”

A risk to this is the coronavirus, which has killed more than 1,700 people – mostly in China – and infected more than 70,000 worldwide, the Bundesbank said.

The virus has severely dented the Chinese economy, as entire cities remain on lockdown and factories and shops remain shuttered. China is Germany’s third-largest customer and accounts for more than 7 per cent of all exports.

Germany is the eurozone’s largest economy and a key engine of growth. The eurozone itself posted its slowest pace of growth in six years in the last quarter of 2019, all but grinding to a half.

FURTHER READING: Eurozone GDP growth poorest since 2013

FURTHER READING:European factory gloom deepens

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