The German economy, Europe’s largest, contracted by a record 9.7% in the second quarter as consumer spending, company investments and exports saw a steep decline due to the coronavirus pandemic.

Although the contraction was the worst on record, it was still less than what economists initially anticipated, after the Federal Statistical Office (Destatis) revised the quarter-on-quarter contraction in gross domestic product down from the 10.1% it initially reported at the end of July.

The economic slump was much stronger than during the 2007-08 financial crisis which saw a 4.7% decline in the first quarter of 2009, and it represented the sharpest decline since Germany began to record quarterly GDP calculations in 1970, the office said.

Read more:  Zombie firms: Will a wave of insolvencies hit Germany?

Consumer spending shrank by 10.9% in the quarter, capital investments by 19.6% and exports by 20.3%, according to official data. Construction activity, normally a consistent growth driver for the German economy, fell by 4.2%.

Meanwhile, stimulus measures designed to support consumers and businesses through the worst of the crisis resulted in the state spending €51.6 billion ($61 billion) more than it took in during the first half of 2020, Destatis said.

An ‘optimistic’ outlook

Despite the economic slump, however, German business morale improved more than expected in August. According to a survey published by the Ifo Institute for Economic Research, firms assessed their current business situations with far more optimism than in the previous month.

The institute said its business climate index, an indicator of economic activity in Germany, rose to 92.6 from a downwardly revised 90.4 in July. This marked the fourth monthly increase in a row, and was higher than economists’ initial expectations of 92.2.

“The German economy is on the road to recovery,” Ifo President Clemens Fuest said in a statement.

Read more: Coronavirus: Germany to take on more debt in 2021 to tackle pandemic

“In the service sector, the business climate index rose sharply,” the statement read. “The service providers were significantly more satisfied with their current business situation.” The outlook for the coming six months also improved, according to the study.

The German government has forecast a 6.3% economic decline for the entire year. At the start of the pandemic in March, experts pushed through a multibillion-euro coronavirus aid package, followed by another €130-billion stimulus in June.

The German decline was one of the less drastic second-quarter contractions among Europe’s major economies as widespread shutdowns over the pandemic ground economic activity to a halt. France, Italy, Spain and the UK all saw double-digit declines in their economic activity.

lc/rc (dpa, Reuters)

Source: https://www.dw.com/en/german-economy-plunges-by-record-97/a-54690807

The post German economy plunges by record 9.7% first appeared on Garner Ted Armstrong Evangelistic Association.

• Germany’s economy avoided a recession at the end of 2018, and analysts expected to see improvement this year. But the picture likely got worse at the start of 2019, according to data released Friday.
• The Ifo Institute for Economic Research’s survey of sentiment in the German economy tanked to a four-year low in February.
• It “held no good news” for the economy, with one analyst saying that Germany is now close to being pushed “over the edge.”
• “Verdammt,” [goddammit] one analyst concluded.
• You can see all of Business Insider’s coverage of Germany’s economic crisis here.

Germany may have narrowly avoided a technical recession at the end of 2018, but worst is likely yet to come for Europe’s most powerful economy if data released on Friday is anything to go by.

The Ifo Institute for Economic Research on Friday released its latest data on sentiment in the German economy, and it was shockingly bad, hitting multi-year lows in the month after it was confirmed that Germany skirted a recession by just 0.2 percentage points. The Ifo sentiment index correlates closely to GDP growth.

Analysts had previously believed that Germany’s weak performance in the last half of 2018 had been the combination of a large number of one-off factors, such as new diesel regulations for cars and the Rhine drying up after a hot summer. They had expressed hope that with those factors out of the way the economy would pick up again in 2019.

“The Ifo index held no good news for the German economy, falling yet again in February to 98.5 from 99.3 – a four-year low,” Oliver Rakau, chief German economist at Oxford Economics wrote in a note to clients soon after the data was released.

“A one-point drop in firms’ assessment of the current situation was the main headwind, highlighting that the near-term growth outlook remains clouded,” he added.

Read more: Europe’s mightiest river is drying up, most likely causing a recession in Germany. Yes, really.

Germany is being buffeted by a whole heap of external and internal factors, including the ongoing slump in global manufacturing, continued trade tensions between the US and China, stuttering demand for Germany’s key export, cars, and record low water levels on the Rhine river, which has hurt industrial production.

These factors have combined to create an environment where Germany, long the powerhouse of Europe’s economic story, is now helping to drag down smaller economies on the continent.

Oxford’s Rakau grasped for any positives in the data, finding comfort only in the fact that forward expectations dropped only slightly from the previous month.

“The best that can be said about today’s Ifo is that forward-looking expectations ‘only’ fell 0.4 points to 93.8 from 94.2, but that still marked the lowest confidence in over six years as a weaker external backdrop and key risks such as Brexit and US car tariffs took their toll on firms’ outlook,” he wrote.

Pantheon Macroeconomics’ Claus Vistesen had a similarly bleak message about the Ifo survey, noting that the headline figure was “horrible,” and delivers a “somber message” about the German economy.

“The chart [pictured below] shows that the IFO is crystal clear in its sombre message,” he wrote. “Whatever happened in the second half of last year got worse in Q1, and is now threatening to push the German economy over the edge.”

“Verdammt [German for damn it],” Vistesen’s one-word summary of the data concluded.

Pantheon Macroeconomics

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Source: https://www.businessinsider.com/germany-economy-data-worsens-at-start-of-2019-after-horrible-end-to-year-2019-2

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The post ‘Verdammt’: Just when you thought the worst was over, Germany’s economy moved dangerously close to falling ‘over the edge’ into recession first appeared on Garner Ted Armstrong Evangelistic Association.