German growth has relied on only two factors, exports and public spending on migrants, according to SouthBay, which predicted the third-quarter GDP contraction. Yet German exports now face an array of threats, notably slowing Chinese demand, and public spending on migrant integration is set to start falling in 2019. And the prospect of the country’s housing bubble coming to an end means that the worst is yet to come. SouthBay predicts further contraction in German GDP in either the fourth quarter of 2018 or the first quarter of 2019 – and that will be the trigger for a Europe-wide recession. SouthBay’s EU shipping index indicates that a fall in intermediate shipments will accelerate into the first half of 2019. Don’t expect any ECB rate hikes in such a context.