German Economy Falters on Weak Exports
Germany industrial exports suffered a 2.7% drop in July, bostering worries that the country may slip into a recession in the third quarter.
Germany’s Federal Ministry for Economic Affairs and Energy reports that the driving force behind July’s decline is a 7% drop in orders from non-Eurozone countries. A rise of 0.5% in Eurozone exports proved insufficient to turn the tide.
Germany’s industrial performance is a foundation of the EU’s economy. July’s poor performance adds to a growing list of factors pointing toward an impending European recession.
Economists worry that Brexit will be an economic blow to both the UK and the EU. Absent another deadline extension, the UK will leave the Eurozone on October 31. The UK currently imports $90.3 billion of goods from Germany each year. With or without a deal, Brexit is likely to reduce that figure substantially.
President Donald Trump’s “America First” policy has also reduced exports to the United States. The president as threatened to impose levies on steel and aluminum in addition to German cars.
A reduction in exports to China is a further worry. China currently imports about $95 billion in German goods each year, but July’s figures show a slowing of demand.
All of these indicators suggest that the German economy’s negative growth could extend throughout the third quarter of the year and into the fourth.
Representatives of the Ministry for Economic Affairs and Energy say they see no signs of a fundamental improvement in the industrial sector in coming months.
German Chambers of Commerce and Industry representatives add that companies around the globe show reluctance to invest due to slowing world trade and growing business uncertainty.
Carsten Brzeski, chief economist of Dutch bank Ing, says the drop in foreign orders is not solely to blame for Germany’s weak economic condition. Brzerski notes that the drop in foreign demand was accompanied by a drop in domestic orders.
German government forecasts call for GDP growth to drop to 0.5% this year from 1.5% last year. This represents a low point in GDP growth last seen during the 2013 European debt crisis.
Albert Einstein is said to have identified compound interest as mankind’s greatest invention. That story’s probably apocryphal, but it conveys a deep truth about the power of fiscal policy to change the world along with our daily lives. Civilization became possible only when Sumerians of the Bronze Age invented money. Today, economic issues influence every aspect of daily life. My job at Fortunly is an opportunity to analyze government policies and banking practices, sharing the results of my research in articles that can help you make better, smarter decisions for yourself and your family.
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