Bundesbank cuts growth forecasts as industry lags

Germany's central bank has cut its forecast for growth in 2019 and 2020, blaming an industrial downturn in Europe's biggest economy.

The Bundesbank said it expected the economy to expand by 0.6% in 2019, down from a forecast of 1.6% growth in December. The central bank also reduced its forecast for 2020 to 1.2% from 1.6%.

The chances of a protracted decline in output are low but growth is more likely to undershoot the forecasts than exceed them, the Bundesbank said.

"The German economy is currently experiencing a marked cooldown," the central bank said in a twice-yearly update on its forecasts. "This is mainly due to the downturn in industry, where lacklustre export growth is taking a toll."

Germany's economy just avoided recession at the end of 2019 and had a tepid revival in the first quarter of 2019 as private consumption helped offset weak industrial performance. In its update the Bundesbank said the underlying trend was subdued and that private consumption would grow more slowly over the next two years.

Exports should start to revive from the second half of 2019, the central bank predicted. Inflation will weaken to 1.4% in 2019 from 1.9% in 2018. Inflation in 2020 will be 1.5%, down from a forecast of 1.8% in December, the Bundesbank said.