German Economy is Struggling

1 German business figures drop again German economy is struggling…The disappointing German IFO report (see 9.20am) suggests the eurozone crisis has got its teeth firmly into Europe's largest economy, with the global economy also providing little relief. It follows yesterday's PMI data, which show ed Germany's private sect or is currently contracting. Reuters has rounded up some early analyst reaction and has polished a report on the subject. The mood within companies has slipped noticeably; the euphoria from the beginning of the year has gone. It is mostly due to developments in Europe: the political stalemate in Italy, then the bungled Cyprus rescue and then news that parts of the Portuguese savings package were unconstitutional. In good times, the global economy would have helped but in the second quarter - there has been no good news from emerging markets: Chinese growth has slowed, battle cries are coming from North Korea and early indicators from the United States have been weak recently. No wonder that companies have lost their hopes for a dynamic recovery. The decline is surprisingly clear. Together with the PMI, it shows that the prospects for the Ger man economy have worsen ed. There is a risk that growth will be slower than expected so far. Many problems in the euro zone remain unresolved; reforms still need to be done. And global weaker growth impulses add to those woes. The sharp dip in Germany’s IFO index marks another nail in the coffin for stronger recovery this year. Germany’s economic fortunes are seeing a dramatic reversal of fortunes. The earlier bravado that Germany could stave off the euro zone debt crisis is taking a tumble. "Business confidence is taking a much gloomier view of the outlook ahead, based on the hard landing in the euro zone and growing signs of slowdown in the global recovery. Based on what we have recently seen from the latest IFO, ZEW and PMI business surveys, Germany will be very lucky to avoid a near- term recession in the recent two quarters. "The economy is still flirt ing with recession this year. With so much of Germany’s economy dependent on the success of its export machine, the downturn in global prospects is bound to be reflected in a weaker outlook ahead. The euro zone debt crisis is the main millstone around the German economy’s neck. The export-driv en German economy is sufferi ng from a sagging global economy. Be cause at the moment even the Asian economies, especially China, are driving with the hand-brake on, important impulses from the Far East ar e also lacking. Instead of raising hope s for a pickup in 2014, economis ts should realise that the economic environment will remain difficult for now. The simple message is: the

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Transcript of German Economy is Struggling

7/28/2019 German Economy is Struggling

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German business figures drop again

German economy is struggling…The disappointing German IFO report (see 9.20am) suggests the

eurozone crisis has got its teeth firmly into Europe's largest economy, with the global economy also

providing little relief. It follows yesterday's PMI data, which showed Germany's private sector is

currently contracting. Reuters has rounded up some early analyst reaction and has polished a report on

the subject.

The mood within companies has slipped noticeably; the euphoria from the beginning of the year has

gone. It is mostly due to developments in Europe: the political stalemate in Italy, then the bungled

Cyprus rescue and then news that parts of the Portuguese savings package were unconstitutional.

In good times, the global economy would have helped but in the second quarter - there has been no

good news from emerging markets: Chinese growth has slowed, battle cries are coming from North

Korea and early indicators from the United States have been weak recently. No wonder that companies

have lost their hopes for a dynamic recovery. The decline is surprisingly clear. Together with the PMI, it

shows that the prospects for the German economy have worsened. There is a risk that growth will be

slower than expected so far. Many problems in the euro zone remain unresolved; reforms still need to

be done. And global weaker growth impulses add to those woes.

The sharp dip in Germany’s IFO index marks another nail in the coffin for stronger recovery this year.

Germany’s economic fortunes are seeing a dramatic reversal of fortunes. The earlier bravado that

Germany could stave off the euro zone debt crisis is taking a tumble.

"Business confidence is taking a much gloomier view of the outlook ahead, based on the hard landing in

the euro zone and growing signs of slowdown in the global recovery. Based on what we have recently

seen from the latest IFO, ZEW and PMI business surveys, Germany will be very lucky to avoid a near-

term recession in the recent two quarters.

"The economy is still flirting with recession this year. With so much of Germany’s economy dependent

on the success of its export machine, the downturn in global prospects is bound to be reflected in aweaker outlook ahead. The euro zone debt crisis is the main millstone around the German economy’s

neck. The export-driven German economy is suffering from a sagging global economy. Because at the

moment even the Asian economies, especially China, are driving with the hand-brake on, important

impulses from the Far East are also lacking. Instead of raising hopes for a pickup in 2014, economists

should realise that the economic environment will remain difficult for now. The simple message is: the

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