The Ifo institute, one of Germany's six leading economic research institutes, does not expect the economy to grow at all this year. The institute had previously forecast gross domestic product growth of 0.5pc. Ifo now joins fellow economic institutes IfW and HWWA in cutting their 2003 growth forecast to zero. The German government still expects the economy to grow by 0.75pc this year Ifo president Hans-Werner Sinn also said today that the institute expects the average number of jobless in Germany to rise to 4.45 million this year and to increase to 4.6 million in 2004.
Germany contracted by 0.2pc in the first quarter of the year. The eurozone's largest economy is also facing a growing threat of deflation; producer prices declined by 0.3pc in May from April - the largest drop in 10 months - according to figures published last week. Data issued today showed that consumer prices in five German states rose in June. Based on the figures, however, economists estimate that the annual rate of inflation in Germany was just 0.9pc in June, less than half the eurozone average. //www.fxcentre.com