The institute previously saw the German economy contracting by 0.2% but have revised the projection lower to 0.4% now, owing to a surprisingly weak second quarter. DIW notes that:
“Households’ spending mood should benefit from significantly lower inflation, but the export-oriented German economy is slow to pick up speed despite an improving global economy.”
Adding that sluggish consumption and weak exports due to faltering demand from China are key factors that are weighing on the outlook for the German economy.