The worst is probably behind us, but the German economy has yet to enter into a clear recovery mode. High-frequency hard data for the final quarter of 2019 for now fails to reflect the fresh – albeit timid – optimism observed in leading sentiment indicators at the turn of 2019/20. The meagre expected Q4 GDP growth performance – we expect 0.1% q/q) – suggests that German economic momentum for now has at best stabilized at low levels

2020 will not bring much relief: For one, ongoing structural headwinds will hold back German GDP growth including the subdued global trade outlook as well as regulatory and technological challenges for the German car sector. Secondly, even though the negative inventory drag should start to fade and base effect will become more favorable as industry embarks on a gradual recovery, the acceleration in momentum will prove too weak to prop up fixed investment growth. As a result the latter should come to a standstill in 2020. Meanwhile consumption – private and public – will remain the key pillar of the German economy, but a further acceleration in spending is unlikely. Overall we expect 2020 German GDP growth to come in at a seasonally-adjusted 0.6%.