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Merkel mismanagement plunges Germany into full on recession (Video)

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of this site. This site does not give financial, investment or medical advice.

The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris discuss Germany’s looming recession as factory output hits a decade low. Germany suffered its biggest slowdown in factory output since the financial crisis, as the eurozone’s biggest economy is speeding towards recession.

Germany’s latest flash composite purchasing managers’ index was 41.4 for manufacturing for September, down from 43.5 the previous month. This is the lowest reading since September 2009. A reading below the 50 mark represents a contraction. The German economy as a whole is contracting for the first time in over six  years, with manufacturing delivering the worst performance, and services also showing a slowdown.

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Via Reuters

German business morale rose in September for the first time in six months but Europe’s largest economy is still likely slipping into recession as the U.S.-China trade conflict and Brexit bite, the Ifo economic institute said on Tuesday.

Ifo’s business climate index rose to 94.6 from 94.3 in August, snapping a run of five consecutive falls. September’s reading compared with a consensus forecast for 94.4.

“The downturn is taking a breather,” Ifo President Clemens Fuest said in a statement. But he added: “In manufacturing, the business climate has only one direction: downward.”

Germany’s export-reliant economy is suffering from slower global growth and business uncertainty caused by U.S. President Donald Trump’s ‘America First’ trade policies and Britain’s planned, but delayed, exit from the European Union.

Ifo’s current conditions index rose to 98.5 from 97.4 in August but its expectations index fell to 90.8 from 91.3.

Ifo economist Klaus Wohlrabe said the German economy is likely to shrink again in the third quarter.

That would put it in recession – usually defined as a period of at least two consecutive quarters of contraction – after it shrank by 0.1% in the second quarter.

“This is not the start of a change of trend,” Wohlrabe said of Tuesday’s firmer overall sentiment reading. “The slowdown is only taking a break,” he told Reuters, adding that no signs of improvement were to be seen for German industry.

Economy Minister Peter Altmaier, speaking immediately after the release of the Ifo data, said Germany’s growth dynamics have deteriorated but insisted: “We are not in a recession.”

Much of the German economy’s fortunes are tied up in factors beyond its control: mainly weaker global growth, developments in the U.S.-China trade conflict and the question of whether Britain can achieve an orderly exit from the European Union.

U.S. Treasury Secretary Steven Mnuchin said on Monday that he and U.S. Trade Representative Robert Lighthizer would meet with Chinese Vice Premier Liu He for trade talks in two weeks.

On Brexit, EU negotiator Michel Barnier struck a downbeat note on Tuesday, saying there was no reason to be optimistic that Britain and the bloc will find a solution to the thorny question of the Irish “backstop”.

ING economist Carsten Brzeski said the likelihood of a third quarter contraction in Germany was rising “almost by the day”.

On Monday, a purchasing managers’ survey showed that German private sector activity shrank for the first time in 6-1/2 years in September as a manufacturing recession deepened unexpectedly and growth in the service sector lost momentum.

Highlighting the weakness in the manufacturing sector, engineering lobby group VDMA also said on Monday production in Germany’s engineering sector will decline by 2% both this year and in 2020. It cited trade conflicts and uncertainties linked to Britain’s planned exit from the EU.

“While a ‘light’ technical recession is not the end of the world for an economy which has been growing for more than 10 years and has an unemployment rate at all-time lows, it is the lack of any signals of an imminent rebound which is more concerning,” Brzeski said.

“Calls for government action will continue,” he added.

Finance Minister Olaf Scholz said earlier this month Germany is ready to pump “many, many billions of euros” into its economy to counter any significant slowdown in growth.

But on Friday, the government said a new package of measures to protect the climate would be budget-neutral and that it was sticking to its ‘black zero’ balanced-budget policy, dashing economists’ hopes for a fiscal splurge.


The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of this site. This site does not give financial, investment or medical advice.

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Abba Lerner
Abba Lerner
September 25, 2019

Alexander hasn’t the foggiest. What has driven German investment was net imports of aggregate demand from abroad. Banks don’t lend out people’s savings. Loans create deposits. Debt creates savings. Spending is income. Someone’s financial debt is another’s financial savings. Stop confusing money with commodities like grain or gold. The German private sector has been able to net save, not because of the interest rate policy, but due to its back to back current account financial surpluses. German’s banking system has been historically strong due to small banks and credit unions, unlike say the UK. Negative interest rates aren’t a problem,… Read more »

Reply to  Abba Lerner
September 25, 2019

I remember the likes of Varoufakis saying that Germany is shooting herself in the foot by constantly wanting to be in commercial surplus vis-a-vis the rest of the Periphery. Well, needless to say many years have passed and that hasn’t happened. Even with a technical recession potentially coming in, it’s not going to bother the Germans, nor the German elites. More borrowing and at a lower cost in the Periphery will mean more orders for German exports anyway… plenty of space to bounce back.

Heinz Guderian
Heinz Guderian
September 25, 2019

Budget neutral? Ha. The German finance minister is rubbish. The government has been running surpluses for some time now. Deficits would be a welcome change. Sadly, their bullsh*t energy policy will only make the country more dependent on imports and increase the price for ordinary consumers.

Jane Karlsson
Jane Karlsson
September 26, 2019

There really isn’t anything Merkel can do, and there never was. Everybody has been waiting for the new technological revolution to revitalise the world economy, and it isn’t happening, for very good reasons.

Who needs artificial intelligence? What is it good for except self-driving cars, which nobody wants? Who needs biotech unless it cures disease or increases crop yields, which it doesn’t?

Israeli scientists were supposed to fix everything (because they’re geniuses you see) and they’ve failed. Netenyahu said recently that the European Union will die without Israeli innovation. Hahaha

Carbon Tim
Carbon Tim
Reply to  Jane Karlsson
September 26, 2019

Jane, I’d like to marry you.

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