Bundesbank confident in German economic outlook

Bloomberg

Germany’s Bundesbank expressed confidence that the economy will quickly overcome its latest slowdown, even though it cautioned that growing protectionism and a disorderly Brexit pose threats to the outlook. The central bank lowered its growth forecasts for 2018 and 2019 and also cut its inflation outlook for next year.
Output in Germany, Europe’s largest economy, contracted in the third quarter for the first time since early 2015 after car production was disrupted by new emissions tests. Since then, business confidence has eased further, hinting at a weakening in momentum. The Bundesbank said that “fairly strong” growth can be expected this quarter and next. Yet, that rebound “masks the fact that the underlying cyclical trend is likely to remain fairly subdued.”
“It is to be expected that the German economy will only grow slightly faster than its potential next year,” Bundesbank President Jens Weidmann said in a statement. “For growth — and to a lesser extent also for inflation — downside risks prevail from today’s perspective.”
While trade tensions between the US and a range of countries eased in recent months, the Bundesbank still sees an elevated risk of growing protectionism worldwide that could perceptibly impair Germany’s export-oriented economy. It also pointed to the continued threat of a disorderly Brexit, geopolitical uncertainty and Italy’s fiscal policy.