Western Europe hasn’t been immune to the global economic slowdown currently underway. Germany, with its export-oriented economy, is one of the countries that has been most affected.

Germany’s Federal Statistics Office announced Wednesday that the country’s gross domestic product (GDP) had contracted by 0.1% quarter-on-quarter in the April-to-June period, raising fears that the country may be headed for a recession. Economists define a recession as two consecutive quarterly contractions.

ING Chief Economist Carsten Brzeski said that the Q2 drop in output came as no surprise. “The point is that the German economy has more or less been in a state of stagnation since the summer of 2018,” he told DW after the latest data was released.

“This in itself does not mean that there’s reason to panic, but it surely means that a golden decade has come to an end in the country. The crucial question now is whether the German government will leave everything in the hands of Donald Trump and his trade policy or step into action itself and offer some fiscal stimulus.”

Industry leaders worried

His concern is shared by a number of German industry leaders, including representatives of the Federation of German Industry (BDI).

“The government’s balanced-budget policy should now be called into question in this economically fragile situation,” BDI Director General Joachim Lang told the German business daily Handelsblatt.

Experts put the quarterly drop in growth down to a slump in exports, with the nation’s manufacturing sector taking a severe blow over uncertainties related to the outcome of the protracted US-China trade conflict and the expected impact of a hard Brexit.

Exporters are certain that the German economy would face additional problems if a no-deal Brexit from the European Union by the UK actually materialized on October 31.

Domestic consumption affected?

What analysts view as particularly worrying is that a long-term pillar of the national economy, domestic consumption, may now also start to crumble. So far, though, demand remains fairly robust amid record-high employment, pay hikes in many sectors of the economy and low borrowing costs, meaning that people have more money in their pockets to spend.

Brzeski called for a level-headed approach to get out of the current slump. He noted that the second-quarter drop was anything but pronounced and wasn’t really reminiscent of what the German economy experienced about a decade ago.

“It’s not dramatic yet compared with the situation [during the global financial crisis in 2008/09. But the German economy is clearly running out of steam and needs a fresh impulse to take off again.”

Although the German economy may be teetering on the edge of recession, the government currently shows little resolve to act. Chancellor Angela Merkel on Tuesday brushed aside domestic and international calls for more fiscal stimulus, insisting there was “no need right now” for such a move.

Economy Minister Peter Altmaier acknowledged, though, that the most recent growth figures were “a warning signal” and showed that simmering trade conflicts had taken their toll.

He told the Bild newspaper on Wednesday that in order to avoid a recession, more investments in future-oriented technologies and digitization had to be made. He also mentioned the possibility of lowering corporate tax in order to support companies.

Source: https://www.dw.com/en/is-germany-edging-toward-recession/a-50019087

The post Is Germany edging toward recession? 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.