Growth, recession, what now?


The economic indicators for Germany, forecasts must be revised downwards. This is the start of a downturn or just a temporary phase of weakness?

Germany is booming, the job market is booming and tax revenues have been rising for years – this is the picture of the German economy, to which we have become accustomed. But lately, the signs that the economy is losing momentum are increasing.

Again and again have been corrected in the past few months, economic forecasts downwards, important early indicators show downward – and sometimes quite significantly.

In December, the Ifo Index, which is considered to be one of the most important German economic barometer had fallen, for the fourth Time in a row. The Munich-based Ifo Institute was met with around 9,000 managers are surveyed each month to your business situation and their expectations for the next six months, to increasing Concerns.

“We have a bunch of political risks in front of us, starting with the trade dispute between the United States and China over the Brexit, and Italy’s deficit and, more recently, France’s rejection of the reforms,” said LBBW chief economist Uwe together Burkert the risks.

“At the same time public place to find effective downward revisions of economic forecasts, and the Brexit process is taking more and more chaotic trains,” said DekaBank Economist Andreas Scheuerle. “In addition, the December could have been destroyed by hail, nor by the protests in France – after all, Germany’s second most important trading partner.”

Fear of a trade war

Regardless of the trade disputes of the United States, China and the EU also expect that it will have an impact on the German economy. Donald trump’s trade policy of “America first” represents the export-oriented German economic model, which relies on free trade and international supply chains around the world so urgently needs, such as Oil and other raw materials.

No wonder that in the current survey, the employer near Institute of the German economy (IW), only seven of the 48 German industry associations to be more optimistic in the future than it was even twelve months ago. By the end of 2017, more than half of all industry associations were with 26 industries are still optimistic.

A recession threatens, therefore, one of the longest phases of economic Upswing in the German economy now? After in the third quarter, German economic output was 0.2 percent shrunk, squinting now all on the Figures for the fourth quarter, the Federal Statistical office on 14. February will be published. Because, if the two quarters as a result of the bruttin country product (GDP), this is officially a recession.

IW Director Michael huether warns in an interview with DW, however, before the panic: “the whole event is something the air. There is more Sand in the gearbox, but it is not a crash.”

Expresses quite clearly the euphoria BDI-chief Dieter Kempf brake:

“The good times are over”

Nevertheless, the skepticism is growing. Most recently, the President of the Federal Association of German industry (BDI), Dieter Kempf was classified, to the camp of the economic pessimists.

“The good times are over,” said Kempf, a few days ago on a business conference the daily newspaper “die Welt” in Berlin. Because the global risks and their consequences, which were already in the past few months, continue to exist. The trade conflict with the United States and a disorderly departure of Britain from the EU is pressing increasingly on the mood of German companies.

The BDI had reduced in December its expectations for German GDP in 2018, from two to 1.5 per cent, as well as the Ifo Institute. The Munich-based economic researchers also expect for 2019 with an increase in the German GDP of 1.1 percent instead of 1.9 percent.

Even if it is not yet certain whether the German economy is slipping really more into the Minus, the experts agreed that the economy has peaked. The last disappointing data on industrial orders, production and Export could not ignore.

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Economy German economy in reverse gear

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Economy German economy in reverse gear

Exports are weakening

The export had your sold in November, 0.4 per cent, less abroad than in the previous month. Imports fell even more, 1.6 percent. Both figures were worse than expected.

Foreign trade and cross-border investment always slows down any more, stated recently, DIHK foreign trade chief Volker Treier. The companies are due to the simmering trade disputes, of Brexits or by the problems of highly-indebted trade partner of France and Italy is increasingly worried.

In addition, the German economy is charged to the balance sheet by the ailing auto industry, which is struggling with problems in the transition to the new exhaust test procedures, WLTP, and the consequences of the diesel crisis. The company had to cut back their production in November for the third Time in a row, because you are suffering from job loss.

Also, the Germany’s flagship industry, the machine manufacturer gets to not feel just that the trees grow to the sky: While you were recently able to grow in the international business slightly decreased orders in the domestic a little more.

“It is the businesses seem to be increasingly difficult to top the already very high prior-year values in the order intake,” said Ralph Wiechers, chief economist at the Association of German machine and plant construction (VDMA).

“Darkening Skies”

The confrontation between the USA and China, leaving behind your tracks. “The world economy is in a difficult Phase,” said world Bank Economist Ayhan Kose. “The sky darkens and we see a global slowdown, rising risks.” Still, global growth was robust, “but if a storm was coming, or it clears, depends to a large extent of how the policy reacts”.

That the trade tensions between the US and China will have major consequences for all other industrial and trading Nations, is obvious. The two largest economies in the world account for 40 percent of global economic output and about 20 per cent of world trade.

In their recently in Washington, presented the current view with the gloomy title of “Darkening Skies”, the Economists of the world Bank of a global growth of 2.9 percent this year, 0.1 percentage points less than the last time. For 2020, you can expect 2.8 percent.

The forecast has been lowered for almost all regions. For the United States, the world Bank expects a slowdown in growth of 2.9 percent in the year 2018 and to 2.5 percent this year and 1.7 percent for 2020.

For China, are expected this year and next year, respectively, 6.2 percent. Clearly, the predictions for several emerging countries, such as Mexico, South Africa and Russia, as well as for Turkey and Argentina were lowered.

Don’t panic, says Commerzbank chief economist Jörg Krämer

Do not panic, in spite of less growth

In spite of everything, Jörg Krämer, chief economist of Commerzbank, calls for a cool head when it comes to the question of whether a recession looms: “I don’t believe in it, but I understand the Concerns. Finally, the economic indicators are down just in the last few weeks bad.”

Also in the USA, the last indicators have fallen and financial markets have reacted to many of the risks with sharp price declines, according to Kraemer. But against a recession speak, that Inflation is low, and the US Central Bank will not be forced, therefore, to sharp increases in interest rates. In addition, the U.S. company, as measured by their earning power were not to blame.

“Unlike the United States, China is already met by the trade war, the growth has cooled noticeably. But against a economic downturn is that the Communist government decided against controls. So you cut taxes and the companies allowed to borrow again later. In case of doubt, you will increase the stimulus package to stabilize the economy,” says Krämer.

This is also the trading partner of China would benefit the EU and the growth in the Euro area, moderate wear. The conclusion of the Commerzbank’s Chief economist, is, therefore, a short and reassuring: “fears of recession are exaggerated.”