Germany

Germany’s economy may have already slumped into recession, its central bank says

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  • Germany’s economy may have fallen into recession, the country’s central bank said. 
  • “Economic output could have decreased slightly in the third quarter of 2019,” after contracting 0.1% in the three months to June, the Bundesbank said in its monthly report.
  • The bank said “the leading indicators currently show few signs of a sustained recovery in the export economy and stabilization in the industrial sector.”
  • The German economy has been hammered by the trade war and Brexit, with exports slowing markedly.
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Europe’s largest economy may have fallen into recession, according to Germany’s central bank.

“German economic output could have decreased slightly in the third quarter of 2019,” the Bundesbank said in its monthly report. If it did, Germany will have contracted for two consecutive quarters — it shrank by 0.1% in the three months to June — meaning it’s officially in recession.

The potential decline was “mainly due to the fact that the export-oriented industry continued to weaken,” the bank said. Exports have been hit especially hard by factors such as Brexit and the trade war. 

The German economy — which is much more dependent on exports than others — has suffered as a result of dropping demand from both the US and China due to increased protectionism. Uncertainty within the UK due to Brexit has also dampened demand.

The Bundesbank downplayed its worrying statement by saying, “A recession in the sense of a clear, broad-based and sustained decline in economic management with under-utilized capacity has not yet been apparent.”

Germany’s particularly large industrial sector contracted over the two months to August, the bank said, and intermediate and consumer good production “fell sharply.” 

Sentiment among German manufacturers dropped to a decade low last month, according to IHS Markit data. Brexit was “paralyzing” car orders and the nation was “seeing the worst performance from the sector since the depths of the financial crisis in 2009,” Phil Smith, principal economist at IHS Markit, said at the time.

The Bundesbank said automotive production, one of the biggest sectors of German manufacturing, declined 1.5% between the second and third quarters.




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