Developments in Germany this week have increased concerns that the euro-zone’s growth engine is really starting to sputter. But we think that some of these concerns are overdone. After all, recent declines in indicators of investors’ expectations tell us nothing new about the actual state of the economy. And there have been some temporary factors weighing on activity that are likely to reverse before long.
That said, it would be wrong to disregard this run of bad news completely. We have nudged down our forecast for German GDP growth this year from 2.7% to 2.5% and we then expect only a gradual slowdown to 2.0% in 2019 and 1.5% in 2020.
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