Global Geopolitics

The economy of Germany shrinks to -0.1%

During this year’s April-June period, Germany’s economy shrank. According to official information, a decrease in exports has dampened development, which comes in the face of worldwide slowdown issues. According to the Federal Statistics Office, the gross national product (GDP) decreased by 0.1 percent compared to the prior quarter.

This reduces the annual growth rate to 0.4%. Germany, the biggest economy in Europe, narrowly avoided last year’s recession.

Worsts of the trade war

While the general numbers were negative, spending on households and government rose, as did investment outside the construction industry. After an exceptionally nice first three months, the construction itself dropped, boosted by a mild winter. But the government of Chancellor Angela Merkel still thinks that this year the economy will develop moderately and does not believe that further stabilizers are needed.

“As the chancellor has already laid out, the government does not currently see any need for further measures to stabilise the economy – the fiscal policy of the German government is already expansive,” a government spokeswoman said.

The Minister of Economy Peter Altmaier said that Germany was not in recession and could prevent one by taking the right action.

Analysis: Andrew Walker, economics correspondent

This is the downside of being a powerhouse that exports. You get rained on when the global economic environment is clouding. Detailed breakdown has not been provided by the German statistical office, but they have confirmed that exports have decreased and have done so by more than imports.

China is at the center of the storms of trade and for Germany it is also a significant export market. In comparison to consumer expenditure and investment in Germany, which both grew, trade held the economy back. The economy fell back in last year’s third quarter, and not all that powerful was the subsequent rebound.

Looking ahead, one issue is whether in the present quarter Germany will see another decrease, which would turn it into a recession as the word is often described. Some latest business confidence surveys were definitely downbeat, so the term “R” is definitely a chance.

That said, Germany could still prevent it, and the nation would at least go into recession with unemployment among the world’s lowest. “Foreign trade development slowed economic growth as exports showed a sharper decline quarter-on-quarter than imports,” said the statistics office.

The US-China trade war and the UK’s departure from the EU are among variables influencing worldwide financial trust, particularly if it occurs without a deal. The International Monetary Fund trimmed its global economy development forecasts for this and next year last month, quoting US-China tariffs, US vehicle tariffs, and Brexit no-deal.

Economic slowdown in China itself has weakened demand for foreign products. As it purchases plenty of luxury vehicles, it is a significant market for Germany. Only America’s and China’s much bigger economies export more products than Germany. The findings may lead officials to consider more financial stimulus, according to Neil Wilson, Markets.com’s chief market analyst.

Meanwhile, the European Central Bank has suggested that it might cut interest rates to tackle the eurozone economy’s slowdown. The ECB said last month that growth was threatened by a fragile manufacturing sector and uncertainty about Brexit and trade. It forecasts prices up to mid-2020 at present or lower levels.

Article originally featured by BBC.

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