Commodities Buzz: German GDP growth prospects weakened by global insecurity

Clouds are gathering over Germany economy as growth begins to slow, a study published on Wednesday. In the study, German Institute for Economic Research (DIW) downgraded its earlier forecasts for the rate of gross domestic product (GDP) expansion in 2018 and 2019 significantly from 2.2 percent to 1.9 percent and 2.4 percent to 1.7 percent respectively.

The trade conflict with the U.S. and concern over certain members of the euro-area, in particular Italy, are worrying companies and causing more restraint with regards to investment, a statement by DIW expert Ferdinand Fichtner read. As a consequence, Germany was likely to fall short of the official 2.2 percent GDP growth rate recorded in 2017 during the coming two years.

The deterioration of German growth prospects was further reinforced by an unexpectedly weak expansion of GDP measured during the first quarter of 2018. The quarterly halving of GDP to 0.3 percent was largely attributed to an unusually severe flu season and widespread industrial action.According to official estimates, the number of Germans in work will rise by 800,000 to reach the record level of 45.1 million in 2018.

At the same time, the number of unemployed is predicted to fall by a further 300,000 to the unprecedented low of 2.2 million. The Berlin-based institute noted that a promised increase in government transfers, for example in the form of higher child benefits, would provide an additional boost to GDP growth of around 0.3 percentage points.