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BERLIN (AP) – Germany, European industrial power and bigger economy, with companies like Volkswagen, Siemens and BASF, could go into recession, according to a bleak report released Monday by the country's central bank – an evolution that could affect the rest of the euro area and the United States.
A technical recession is two consecutive quarters of negative growth and a 0.1% decline in Germany between April and June. In its monthly report, the Bundesbank said that with the decline in industrial production and orders, it seems that the recession will continue in the quarter from July to September.
"The overall economic performance could fall further," he said. "The slowdown in the industry is at the heart of this evolution."
Deutsche Bank went further on Monday, saying "we see Germany in a technical recession" and forecasting a 0.25% drop in economic output this quarter.
The German economy is highly dependent on exports and the Bundesbank has said that the US-China trade dispute and the uncertainties over Britain's decision to leave the European Union have had a negative impact. The United States and China are among the main trading partners of Germany, closely followed by Britain.
In addition, the German car industry with giants such as Volkswagen, Daimler and BMW – is facing difficulties in adapting to more stringent emission standards in Europe and China and technological developments related to growing demand for electric vehicles. Germany is also home to major companies such as Bayer, Merck, Linde and the ThyssenKrupp Group.
The Bundesbank report is in line with economists' consensus that "the risk of another quarter flirting with the recession is high," The Associated Press told Carsten Brzeski, the bank's chief economist. ING in Germany.
"The general situation is that trade disputes and uncertainty are finally starting to hurt one of the most open economies," he said.
Although the labor market remains strong in Germany and unemployment is at historically low levels, economic concerns would cause consumers to stop buying – or at least postpone their purchases – which could hamper growth in the countries that matter on Germany for their markets. exports.
"If this stagnation / recession continues and leaves more lasting traces on the national economy, the rest of the world will also notice it," Brzeski said. "Just think of the drop in German demand for foreign products or a slowdown in German economic activity that would have weighed on the rest of the eurozone. It could be a result of boomerang effect for the United States, showing that no one really wins the trade wars. "
In the United States, a survey of business economists released on Monday revealed that 74% of respondents seemed sufficiently concerned about the risks inherent in some of President Donald Trump's economic policies to expect a recession. in the United States by the end of 2021.
In the midst of the trade dispute between Washington and Beijing, growing prospects for Britain to leave the EU without an exit agreement and growing fears that countries are eager to devalue their currencies, the monthly poll ZEW from German investors fell to its lowest level last week. 7 and a half years.
"The ZEW indicator of the economic climate suggests a significant deterioration in the prospects of the German economy," said Achim Wambach, chairman of the Mannheim-based institute.
Germany should still post modest growth this year, with the Bundesbank forecasting 0.6% and the government a 0.5% growth, but its slowdown is already starting to impact on the enlarged euro area of 19 countries, which announced last week halved its growth. in the second quarter only 0.2%.
In response to economic sluggishness, the European Central Bank announced that it is preparing a package of additional monetary stimulus measures, including a possible rate reduction and bond purchases, which could be announced at its first meeting. meeting of 12 September.
Germany led by Chancellor Angela Merkel has been running budget surpluses for years, but the International Monetary Fund, the US Treasury Department and others have pushed decisively to take action to boost domestic demand, such as tax cuts and additional infrastructure spending.
During the recession ten years ago, the Merkel government was widely criticized for delaying a stimulus package, although it eventually adopted measures of some 80 percent. billion euros, the largest of its kind in the country 's post – war history.
Last week, Merkel, who will not run in the next elections, scheduled for 2021, hinted that she was open to the possibility of stimulus, claiming that a "package deal" was not necessary ", but that" we will react according to the situation. "
She said her government was already working on plans to remove in most cases an income tax to cover the costs of rebuilding the former East Germany.
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