• Germany's news in English

How rocky is Germany's economy?

AFP/The Local · 7 Oct 2014, 13:10

Published: 07 Oct 2014 13:10 GMT+02:00

Facebook Twitter Google+ reddit

Along with a drastic fall in industrial production reported on Tuesday, there have been declines in consumer confidence and German competitiveness in recent weeks, topped off with weaker than expected job figures.


The production figures were “a disappointment,” Joachim Scheide of the Kiel Institute for the Economy (IFW) told The Local.

“No-one expected production to fall so much in August,” he said. “That could mean that GDP growth will sink this year in the third quarter and not grow much in the fourth.”

After a second quarter which also saw the economy shrink by 0.2 percent, that would technically put the country in a recession, defined as two consecutive quarters of economic contraction.

"August's big drop in industrial production all but confirmed that German industry is back in recession," said Jonathan Loynes of Capital Economics.

On top of the production figures, industrial orders fell by 5.7 percent in August, Destatis figures showed on Monday, the biggest fall since 2009.

“That means a bad outlook for the coming months," Scheide said.

A one-off fluke?

Other economic observers were not so quick to wave the warning flag of recession, with Andreas Rees of UniCredit saying “there is no reason to dig up the R-word again.”

“Shutdowns in the auto industry due to the late [school] summer holidays played an important role,” in what was essentially a technical drop in the figures, he added.

“German industrial activity will soften in coming months, as already indicated by business sentiment, but not tumble into the abyss.”

But Natixis economist Johannes Gareis said that the effect of the school holidays “could not explain the whole weakness.”

“The underlying growth trend of the German economy has heavily slowed down,” he said.

Not Germany's fault

Scheide points elsewhere to the origin of the problem, with the impact of European sanctions against Russia over Ukraine and the weak economies of Germany's trading partners to blame.

“The German economy is basically in good shape,” he said. “What's affecting the climate, putting pressure on activity, is uncertainty in the world economy and in international politics.”

“It's particularly disappointing that the big countries in Europe, France and Italy especially, are basically stagnating and not recovering.”

The figures showed that industrial orders from abroad were down 8.4 percent in August, while within Germany the drop was limited to just 2 percent.

Story continues below…

Where next?

Scheide does see positive signs which will allow Germany to pull out of the doldrums.

“There is strong momentum, especially from extremely low interest rates, which will stimulate the economy in the medium term.”

The European Central Bank (ECB) has cut interest rates to all-time lows and promised to pump cash into the economy to stimulate activity.

But Loynes said there was a “need for the ECB and the German government to give the Eurozone's biggest economy much more policy support.”

Germany's government has consistently been urged to invest and spend some of its record tax receipts, but that would mark a serious policy shift by Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble.

SEE ALSO: Industrial output collapse blamed on holidays 

For more news from Germany, join us on Facebook and Twitter.

AFP/The Local (news@thelocal.de)

Facebook Twitter Google+ reddit

Your comments about this article

Today's headlines
Obama to visit Berlin in last presidential trip to Germany
President Barack Obama and Chancellor Angela Merkel during a Berlin trip in 2013. Photo: DPA.

The White House announced on Tuesday that US President Barack Obama will be paying one last unexpected visit to the German capital - his last before he leaves office.

Hostility towards minorities 'widespread in Bavaria'
A village in southern Bavaria. Photo: DPA.

Hate and hostility towards groups deemed to be different are not just sentiments felt by fringe extremists, a new report on Bavaria shows.

Hated RB Leipzig emerge as shock challengers to Bayern
RB Leipzig. Photo: DPA

RB Leipzig's remarkable unbeaten start to the Bundesliga season has seen them suddenly emerge at the head of the pack chasing reigning champions and league leaders Bayern Munich.

Munich taxi driver in hospital after attack by British tourists
Photo: DPA

A taxi driver had to be hospitalized in Munich on Monday evening after three British tourists refused to pay their fare and then attacked him.

German police carry out nationwide anti-terror raids
Police outside a building in Jena during raids on Tuesday. Photo: DPA

Police forces in five German states carried out raids on Tuesday morning with the aim of tackling the financing of terror groups, police in Thuringia have reported.

The Local List
10 ways German completely messes up your English
Photo: DPA

So you've mastered German, but now it's time to learn English all over again.

Iconic German church being eroded away by human urine
Ulm Minster towering over the rest Ulm surrounding the Danube. Photo: Pixabay

It will now cost you €100 to spend a penny. That’s if you get caught choosing to pee against the world-famous Ulm Minster.

German small arms ammo exports grow ten-fold
Photo: DPA

The government has come in for criticism after new figures revealed that Germany exported ten times the quantity of small arms ammunition in the first half of 2016 as in the same period last year.

14-year-old stabs 'creepy clown' in prank gone wrong
File photo: DPA.

A 16-year-old in Berlin decided he wanted to scare some friends, but his plot backfired in a violent way.

Four Ku Klux Klan groups active in Germany, says govt
An American member of the KKK at a gathering in Georgia. Photo: EPA.

The German government estimates that there are four Ku Klux Klan (KKK) groups currently active in the country, according to a report by the Süddeutsche Zeitung (SZ) on Tuesday.

Germany's 10 most weird and wonderful landmarks
Sponsored Article
Last chance to vote absentee in the US elections
10 things you never knew about socialist East Germany
How Germans fell in love with America's favourite squash
How I ditched London for Berlin and became a published author
12 clever German idioms that'll make you sound like a pro
23 fascinating facts you never knew about Berlin
9 unmissable events to check out in Germany this October
10 things you never knew about German reunification
10 things you're sure to notice after an Oktoberfest visit
Germany's 10 most Instagram-able places
15 pics that prove Germany is absolutely enchanting in autumn
10 German films you have to watch before you die
6 things about Munich that’ll stay with you forever
10 pieces of German slang you'll never learn in class
Ouch! Naked swimmer hospitalized after angler hooks his penis
Six reasons why Berlin is now known as 'the failed city'
15 tell-tale signs you’ll never quite master German
7 American habits that make Germans very, very uncomfortable
Story of a fugitive cow who outwitted police for weeks before capture
Eleven famous Germans with surnames that'll make your sides split
The best ways to get a visa as an American in Germany
jobs available
Toytown Germany
Germany's English-speaking crowd