German Chancellery Also Sees Mild Recession, Spiegel Reports

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The German Chancellery now also expects Europe’s largest economy to slip into a mild recession in the third quarter, news magazine Der Spiegel reports on Friday.

Gross domestic product contracted by 0.1% in the second quarter, and Angela Merkel’s economic advisers expect a similar result in the period between July and September.

Economists at the German central bank had been making the same prediction, Bloomberg News reported on Thursday. A raft of data recently pointed to a slump in German manufacturing that risks spreading to the services sector.

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Conventionally, two consecutive quarters of economic contraction would be considered a technical recession.

The chancellery declined to comment but referred to a news conference earlier on Friday when an economy ministry spokeswoman said Germany is not in a recession.

While contingency measures are being prepared, central bankers and government officials agree that it’s premature to launch a stimulus package now. Berlin still expects a recovery toward the end of the year.

Germany is prepared to defend its adherence to a balanced budget policy if it were challenged at a leaders meeting at the Group of Seven major economies in Biarritz, France, a senior government official in Berlin said on Friday.

The economic slowdown from over 2% in 2016 and 2017 has prompted calls by business leaders and politicians for the Merkel administration to open the purse strings.

--With assistance from Arne Delfs and Birgit Jennen.

To contact the reporter on this story: Raymond Colitt in Berlin at rcolitt@bloomberg.net

To contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net, Paul Gordon

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