German Economy Will Shrink 0.1% in 2012, IMK Institute Says

Germany’s economy will shrink 0.1 percent this year as a recession in the euro region damps export demand, according to the labor union-affiliated IMK economic institute.

Austerity measures by euro-area governments are weighing on demand, making a recession in the 17-nation bloc “unavoidable,” the Dusseldorf-based institute said today in an e-mailed statement. That will depress Germany’s foreign sales and corporate investment, it said.

“Thanks to moderately robust consumer demand, Germany should be able to avoid a recession this year, but we don’t expect more than stagnation,” the institute said. “The positive trend in the labor market as well as the reduction of the government debt ratio are unlikely to continue in 2012.”

German companies, working off orders for exports and investment goods, have so far defied a debt crisis the European Commission says risks triggering a recession in the euro area. Data today showed unemployment in Germany fell more than twice as much as economists had forecast in December. The adjusted jobless rate fell to 6.8 percent from 6.9 percent.

The IMK said its growth forecast for this year is “an optimistic assessment of the economic situation” as it assumes that the euro region’s debt turmoil can be stabilized quickly.

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