Risk of recession for the German economy significantly higher

Is the economic slowdown of the German economy in the second half of 2018 an indication of a phase of short-term economic weakness, or can a prolonged recession be expected? Kai Carstensen of the University of Kiel, Magnus Reif of the ifo Institute, and Maik Wolters of the University of Jena estimate the current risk of recession using a dynamic, nonlinear factor model. Their results suggest that the risk of a recession is currently significantly higher and that a phase of economic weakness can also be expected in the coming quarters. This is indicated in particular by the ifo Institute’s survey data, which have been pointing downwards for some time.