Chances of a German Recession Are Falling: Ifo’s Fuest

Channel: Bloomberg Markets and Finance
Published: 01/27/2020

Jan.27 -- Clemens Fuest, president at Ifo Institute, discusses the latest reading of German business confidence. He speaks with Bloomberg’s Francine Lacqua on "Bloomberg Surveillance."

Mr. first, i know i ask every time, but what are the chances now of a recession in germany good morning? I think these chances are falling, so we do not expect a recession, but we had weak growth last year. That'S true, but i think that these chances are falling, although the index has gone down, but this decline is coming now from the service sector and from construction industry, whereas the goo ...
news is that manufacturing is recovering and our interpretation of that picture is this stabilization in Manufacturing we saw last year is continuing and because manufacturing is so important for the german economy. We take this overall as a good sign, despite the decline in the overall index, so manufacturing is recovering, but what would it actually take for the sector to return to decent rates of growth? Yes, that's right. This recovery would have to continue and it would probably have to extend to automotive and the automotive industry is still weak, so there's some way to go, but still overall, these are all positive signs. We see in services and construction, a slight decline that is related to rising prices in construction, industry and services are weak where they are close to industry so, for instance, in logistics. So we are not entirely out of the doldrums, but we are optimistic that there's not going to be recession. What does the us-china trade deal actually mean for germany and we were in davos last week when president trump also talked about possible tariffs against europe and germany? Is there anything that german plc can do to protect themselves from land? It'S a tricky situation. There'S this looming trade, trade war isn't going away and that weighs under manufacturing. At the same time, there is a hope that trump will not want to take the risk of a full-blown trade war with europe. It seems that he's more like trying to fend off digital taxes, maybe also a carbon tax and and coming up with these threats, that's creating uncertainty, but i think it's unlikely that he wants a full blame blow on trade war when he needs a good economy economy. In the us, in the run-up to the elections and what's the biggest risk for germany this year? Well, it certainly is the outbreak of the trade war.

It would also be a recession in china. China continues to be a very important market, for germany has a huge impact on the global economy, so i think the chinese situation that was fragile even before about before the outbreak of the virus. That is the major threat more, i would say then, threat of a trade war with the us.

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