DAX: Bloomberg Sees Mild Recession in Europe’s Largest Economy from Low GDP Growth and Output

Bloomberg reported today their survey of economists for the German economy at flat for 2024.

The consensus for 2025 is a mild recovery after the economy dips into a mild recession in Q3 and Q4 2024.

The DAX opened with another rally today, but so far has failed to print a new all-time high. The market is set for a week of high-profile events. The main one being the ECB policy meeting on October 17.

The market now widely expects the central bank to cut rates again by 0.25%, for back-to-back easing of 0.50%. The question remains as whether the monetary loosening is coming too late.

The China stimulus package, which initially sparked a lot of high hopes in stimulating internal demand for German seems to have dissipated. The market is more focused on revived internal demand and ECB policy.

Also on October 17, we have Inflation data for the Eurozone a few hours before the ECB meeting. Analysts expect a sharp decline from 2.2% to 1.8% for the broad inflation index. While they only expect Core Inflation to fall to 2.7% from 2.8% last month.

ECB Policy

Presumably even a small drop in inflation will be sufficient for the ECB to stay on track for further cuts. Central bank officials have spoken on various occasions of the stagnation in the Eurozone economy.

The various statements have given rise to the high expectations for a cut in their next meeting. The exercise many analysts are making now, is gauging just how low the central bank’s interest rates will go.

The next meeting in January is when the market expects the next cut to take place. And if forecasts for the Eurozone economy are on target that cut in January is highly unlikely the last. Until recently, most economist saw the bottom of the loosening cycle at 2%-2.25%.

BofA has recently issued a report where they see the terminal interest rate for the ECB at 1.5% at best. Citing that before the pandemic the central bank maintained a neutral rate that was even lower.