Only Weak Economic Growth in the Euro Area

One factor serving as a brake on growth is industrial production, which shrank by 0.6 percent in the third quarter but is set to recover slightly, increasing by 0.2 and 0.3 percent in the next two quarters respectively.

Growth is being driven by private consumption, which is still supported by the good situation on the labor market and is expected to grow by 0.3 percent in both the third and fourth quarters of 2019 and in the first quarter of 2020.

Inflation will likely come in at 1.0 percent in the third quarter, 1.1 percent in the fourth quarter, and 1.4 percent in the first quarter of 2020. All these rates fall short of the European Central Bank’s target of below, but close to, 2.0 percent.

The greatest risks for the forecast are posed by turbulence in world politics: the trade wars, the threat of Brexit, and military attacks on oil supply installations. Possible negative consequences for world trade arising from this could adversely affect Germany’s growth as an export nation in particular, which in turn would have an impact on the rest of the euro area.