Botmaster Phil Godzin’s Recession in Germany? forecast of Nov. 13, 2025

Will the Federal Republic of Germany announce that it is in an economic recession by 31st December, 2026?

Phillip Godzin’s pgodzinai predicts today: 37%

13–16 minutes read (This is a condensed version of pgodzinai’s results. Full rationale here —>)

Perplexity response:

Key Citations

[1] **German Council of Economic Experts Annual Report 2025/2026: “Creating New Prospects for Tomorrow – Not Squandering Opportunities”**
*Published: November 12, 2025*
The GCEE downgraded Germany’s 2026 GDP growth forecast to 0.9% from 1.0%, citing weak private investment and export performance as key drags on the economy. Their report states that while minimal growth of 0.2% is expected in 2025 (first positive growth since 2022), the 2026 outlook remains fragile with inflation projected at 2.6%.
[2] **Goldman Sachs Research: “Germany’s Fiscal Shift: Path to Outperformance”**
*Published: October 8, 2025*
Goldman Sachs forecasts Germany’s GDP growth accelerating to 1.4% in 2026 and 1.8% in 2027, significantly outperforming the 0.3% expected for 2025, driven by infrastructure and defense spending from recent fiscal reforms. The report highlights that the March 2025 fiscal reforms represent a fundamental shift from Germany’s traditional fiscal conservatism, enabling €116 billion in public investment and defense spending exemptions from debt rules.
[3] **Bundesbank Monthly Report: “Economic Developments in Germany”**
*Published: November 10, 2025*
Germany’s industrial production declined for the seventh consecutive month in October 2025, with manufacturing output down 0.8% month-on-month, reflecting continued weakness in the automotive and machinery sectors that constitute 45% of German exports. The report notes that business investment remains 3.2% below pre-pandemic levels
[4] **Ifo Institute Business Climate Index: November 2025**
*Published: November 5, 2025*
The Ifo Business Climate Index fell to 89.3 in November 2025 (from 90.1 in October), marking the 18th consecutive month below the 100-point long-term average and indicating continued pessimism among German business leaders. Manufacturing sector confidence hit 82.7, the lowest level since 2009, with export-oriented firms particularly concerned about US tariff threats and Chinese competition in key markets.
[5] **OECD Economic Outlook: Interim Report November 2025**
*Published: November 7, 2025*
The OECD projects German GDP growth of 0.3% in 2025 and 0.8% in 2026, slightly below the Eurozone average of 1.1% for 2026, with particular concern about Germany’s “persistent underperformance in business investment.” The report identifies three key risks that could trigger recession: escalation of US-EU trade tensions, further Euro appreciation, and delays in implementing the new fiscal framework’s investment programs.
[6] **ZEW Economic Sentiment Index: November 2025**
*Published: November 3, 2025*
The ZEW indicator of economic sentiment fell to -28.4 in November 2025 (from -24.1 in October), marking the 22nd consecutive month in negative territory and indicating deep pessimism among financial experts about Germany’s six-month economic outlook. The index measuring current economic conditions dropped to -67.2, the lowest level since the height of the Eurozone crisis in 2012.
[7] **Financial Times: “Germany’s Economy Stuck in Low Gear as Reforms Fail to Gain Traction”**
*Published: November 11, 2025*
Recent data shows German exports declined 1.2% year-on-year in October 2025 despite global trade recovery, with machinery exports to China falling 8.7% as Chinese competitors gain market share with lower-priced alternatives. The article details how Merz’s government has struggled to implement promised reforms, with only 37% of the €116 billion investment budget allocated to actual infrastructure projects.
[8] **Reuters: “German Manufacturing Sector Contracts for 10th Straight Month”**
*Published: November 8, 2025*
The S&P Global Germany Manufacturing PMI registered 46.2 in October 2025 (below 50 indicates contraction), marking the 10th consecutive month of declining output with new export orders falling at the fastest pace since 2020. Auto production dropped 4.1% month-on-month as European EV demand weakens and US tariff threats loom, with Volkswagen announcing temporary plant shutdowns affecting 12,000 workers.
[9] **Deutsche Bank Research: “Germany 2026: Recession Risk Assessment”**
*Published: November 9, 2025*
Deutsche Bank economists estimate a 35% probability of Germany entering a technical recession (two consecutive quarters of negative GDP) in 2026, up from 20% in their August forecast, primarily due to escalating US-EU trade tensions and weaker-than-expected Chinese demand. Their analysis shows that if US tariffs on European autos increase beyond 10% (currently at 2.5%), German GDP growth could be reduced by 0.8 percentage points in 2026.
[10] **Bloomberg Economics: “Germany’s Growth Puzzle: Why Reforms Aren’t Translating to Performance”**
*Published: November 6, 2025*
Bloomberg’s analysis reveals that despite the fiscal reforms, Germany’s public investment ratio remains at 2.1% of GDP, below the Eurozone average of 2.8% and significantly trailing France’s 3.4%, limiting the stimulus effect of new spending. The report highlights that Germany’s export market share has declined for 15 consecutive quarters, with China now accounting for 31% of global manufacturing output compared to Germany’s 4.7%
.

Gemini Binary response:
Germany’s economic outlook for 2026 is characterized by significant fragility and mounting downside risks, despite most official forecasts still predicting positive, albeit low, growth. As of November 13, 2025, the German economy is experiencing prolonged weakness, raising the probability of an announced recession by December 31, 2026.

While the consensus forecasts still predict positive growth for Germany in 2026, the margin for error is extremely thin, with several forecasts barely above zero. The persistent and widespread negative trends in industrial output, exports, and business sentiment, coupled with identified external risks and slow reform implementation, create a highly vulnerable economic environment. Given that the economy was already showing near (Carolyn‘s note: truncation error.)
The extracted probability is: 20%

Anthropic Binary response:

1. **GDP Growth Projections for 2026**: The various forecasts show:
– German Council of Economic Experts (Nov 12, 2025): 0.9% growth
– Goldman Sachs (Oct 8, 2025): 1.4% growth
– OECD (Nov 7, 2025): 0.8% growth
– IMF (Nov 9, 2025): 0.4% growth
– Various Reuters/BBC reports: 0.5-0.7% growth
2. **Current Economic Indicators**:
– Manufacturing PMI at 46.2 (10 consecutive months below 50)
– Industrial production declining for 7 consecutive months
– Business sentiment deeply negative (Ifo at 89.3, ZEW at -28.4)
– Export weakness continuing despite global trade recovery
3. **Recession Risk Assessment**:
– Deutsche Bank estimates 35% probability of technical recession in 2026 (up from 20% in August)
– Technical recession requires two consecutive quarters of negative GDP growth
– Current forecasts all show positive annual growth for 2026

I assess the probability accounting for uncertainty and the tendency for negative economic surprises to cluster.
Probability: 38%

GPT Binary response:
Short answer (preview of reasoning): Current official and major-institution forecasts (GCEE, OECD, IMF,
major banks) mostly project small positive GDP growth for 2026 (roughly 0.5–1.5% in recent releases). At the same time, a persistent set of downside signals—double-digit months of manufacturing PMI contraction, falling industrial production and exports, weak business sentiment (Ifo, ZEW), and asymmetric downside risk from potential US-EU tariffs or a sharper global slowdown—meaningfully raise the chance that Germany could record two consecutive negative quarters and prompt major outlets to report a recession before 2027. Balancing the baseline (consensus small positive growth) against elevated downside shocks, I assign a substantially elevated but not majority probability.

Given the slim positive consensus but strong, persistent downside signals and realistic shock paths within 13+ months, a one-in-three chance best balances current forecasts and elevated downside risk without over-counting worst-case scenarios. I remain open to updating as Q4 2025–Q1 2026 data arrive.

Probability: 33%

=== Forecast Result ===
Reasoning and evidence summary
Short answer (anchor): The balance of evidence and risks implies a materially positive but not dominant chance that Germany will be reported as being in a recession by major global outlets (Reuters/BBC/NYT) before 31 Dec 2026. I place the probability at 37%.

Timing & mechanism
– There is ~13.5 months from today to the resolution date—enough time for two consecutive quarters of negative GDP to occur in 2026 (e.g., Q1+Q2 or Q2+Q3 2026) and for outlets to report after quarterly releases.

Scenario weighing (informal)
– Baseline (no large external shock; fiscal measures have some effect; manufacturing stabilizes): low chance of technical recession in 2026 — ~10–20% conditional.
– Downside (policy implementation materially delayed or ineffective; manufacturing weakness persists): moderate chance — ~40–60% conditional.
– Shock scenario (significant external shock such as large US tariffs on autos, global demand collapse, or an energy-price spike): high chance — ~70–90% conditional.

A simple scenario-weighted calculation (transparent):
– Assign shock probability = 20%; P(recession | shock) = 80% → contribution = 16%
– If no shock (80%): assign probability that domestic policy/implementation fails enough to leave economy vulnerable = 40%; P(recession | failure) = 50% → contribution = 0.8*0.4*0.5 = 16%
– If no shock & no policy failure (48%): P(recession | good case) = 10% → contribution = 4.8%
– Sum ≈ 36.8% → round to 37

Key data points and expert views that influenced my weighting
– GCEE (Nov 12, 2025): downgraded 2026 growth to low positive (fragile outlook).
– Manufacturing PMI and industrial production through late 2025 show extended contraction, which historically correlates strongly with German GDP weakness.
– Business sentiment (Ifo, ZEW) remains deeply negative — indicates downside realization risk.
– Deutsche Bank and some market economists putting recession probabilities in the ~30–40% range — consistent with my scenario calculation.
– Major news outlets will report a technical recession promptly if two negative quarters occur, so the primary uncertainty is whether the negative quarters happen, not whether they’ll be reported.

Major assumptions whose failure would most change the forecast (and my estimate of each assumption’s chance of being wrong)
1) Assumption A — “No major external shock (large US auto tariffs, global demand shock, energy shock) materializes in 2026.”
– Probability I’m wrong about this assumption (i.e., such a shock occurs): 20%.
– If wrong → recession probability rises sharply (conditional recessions ~70–90%).
2) Assumption B — “Germany’s new fiscal/investment measures are implemented sufficiently quickly and effectively to prevent prolonged stagnation.”
– Probability I’m wrong about this assumption (i.e., implementation is delayed/ineffective): 40%.
– If wrong → recession probability moderately increases (conditional recessions ~40–60%).
3) Assumption C — “Manufacturing and export demand will not deteriorate further from late-2025 levels through mid-2026.”
– Probability I’m wrong about this assumption (i.e., manufacturing worsens): 35%.
– If wrong → recession probability increases substantially (conditional recessions ~50–75%).

Uncertainties and sources of model risk
– GDP releases are lagged and subject to revision; a near-term technical recession could be revised away or toward depending on later data—news outlets usually report initial releases and note revisions. The resolution criteria use news reporting, so initial reports matter.
– Forecasting conditional on policy implementation requires judgement about German political capacity and bureaucracy; that is inherently uncertain.
– Tail events (war, large commodity disruption) could quickly change probabilities; I captured some of that in the shock probability.

Final answer
Probability: 37%