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GERMANY WARNING: Merkel hit by GLOOMY forecast as Bundesbank predicts economy will TUMBLE

Germany returned to growth in January to March of this year, skirting fears of recession after struggling from dented manufacturing figures at the end of 2018. Gross domestic product (GDP) rose 0.4 percent quarter-on-quarter and 0.7 percent year-on-year calendar-adjusted, preliminary figures from the Statistics Office showed Wednesday. It means the German economy avoided slipping into the red, after recording a contraction of 0.2 percent for July to September last year and zero growth for October to December. A recession is defined as two or more consecutive quarters of contraction.

But despite being back in the green for this year so far, German lender Bundesbank is predicted the economy will lose some steam in the second quarter.

The Bundesbank said in its monthly report that the rebound in the first quarter was driven by “several special factors” which means the economy would struggle to keep its growth pace in the April to June period.

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The central bank said that Germany’s car industry was facing weaker demand from abroad and that global car sales were expected to decline further this year after posting the first drop since the financial crisis in 2018.

Germany has also been impacted by escalating tensions between China and the US, with Beijing remaining the most important trading partner for Berlin outside the European Union.

The report said: “German economic output in the second quarter of 2019 is not very likely to exceed the level reached in the first quarter, which had been boosted by a number of one-off effects.

“Downturn forces continue to be prevalent in industry, and they may even intensify somewhat.”

Last month, economy minister Peter Altmaier lowered the German growth forecast for 2019 to 0.5 percent.

This is down from an already lowered estimate of 1.0 percent, while initial GDP growth expectations for this year were once as high as 1.8 percent.

However, the German government is insisting momentum is expected to pick up in 2020 where growth of 1.5 percent is expected.

Mr Altmaier described the positive quarter of growth for this year as a “first ray of hope” following two quarters without expansion.

But he added that this should be no reason to give the all-clear.

Mr Altmaier said: “The international trade disputes are still unresolved.

“We must do everything possible to find acceptable solutions that enable free trade.”

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