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germany’s gross domestic product will shrink slightly this year, the latest forecasts show, as a series of negative reports point to a bleak outlook for europe’s largest economy.

on thursday, germany's diw forecaster said in a statement that germany's gdp will shrink by 0.1% in 2024. in march, the figure was 0.1% higher.

“in addition to the recession, the german economy is also being weighed down by structural changes,” said geraldine dany-knedlik, head of economic policy at the diw.

some analysts believe that the continued downward trend of the german economy has increased the possibility of the european central bank cutting interest rates at its policy meeting in october this year. tonight, european central bank president lagarde will deliver a speech, which may bring hope to the german economy.

there are increasing signs that the german economy is facing increasing downward pressure

recently, market concerns about a significant downturn in the german economy have intensified, with the key manufacturing automotive industry being hit particularly hard.

the bundesbank warned that germany may already be in recession, with gdp likely to contract again in the third quarter after a 0.1% fall in the second quarter. a recession is usually defined as two consecutive quarters of contraction.

“decarbonization, digitalization and demographic change have triggered a structural adjustment process that is weakening the long-term growth prospects of the german economy,” dany-knedlik said.

the agency predicts that germany's economic growth will accelerate to 0.8% in 2025, lower than the 1.4% predicted in the spring forecast.

there are increasing signs that the german economy is facing increasing downward pressure.

germany's business climate index fell to 85.4 in september from 86.6 a month earlier, the fourth consecutive month of decline, according to data from the ifo institute on tuesday.

business sentiment fell in all sectors except construction. in manufacturing, the index fell to its lowest level since june 2020.

analysts: germany's sluggishness increases the possibility of a rate cut in the eurozone

"the german economy is on the brink of a downward spiral," ifo economist klaus wohlrabe told reuters.

“the german economy is under increasing pressure,” said clemens fuest, president of the ifo institute. “the core sectors of german industry are struggling.”

the manufacturing index, traditionally a stronghold of the german economy, plunged again, reaching its lowest level since june 2020. on monday, pmi data released by s&p global and hamburg commercial bank (hcob) also showed that the plight of the german manufacturing industry has worsened, customers have become more cautious, and related investment has decreased.

excluding the first few months of the pandemic, german companies as a whole are cutting jobs at the fastest pace in 15 years. pessimism is evident among businesses, including fears of a recession, market uncertainty and weakness in the automotive and construction sectors.

“the german economy is back to where it was a year ago: growth in the euro area is lagging and shows few signs of an imminent improvement,” said carsten brzeski, head of macro at dutch bank ing.

franziska palmas, an economist at capital economics, said that in addition to signs of a continued downturn in the german economy, continued pessimism among businesses increased the likelihood that the european central bank would cut interest rates for the third time at its next policy meeting in october this year.