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GDP: Germany is in a dangerous state of stagnation

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Germany is in a dangerous state of stagnation

Status: 09:37 a.m. | Reading time: 4 minutes

German economy stagnated at the end of 2019

The German economy is at a standstill. In the last three months of 2019, gross domestic product no longer grew compared to the previous quarter. The Federal Statistical Office announced.

Economic growth came to a standstill in the fourth quarter of last year. Industry in particular pulled GDP down. Economists fear a further decline in the next three months.

DThe half-lives of economic statistics and forecasts are getting shorter and shorter. Not even a month ago, the Federal Statistical Office still expected a slight increase in the fourth quarter when it presented the annual growth figures for Germany. The federal government spoke two weeks ago in the annual economic report that the German economy has picked up speed again.

But statisticians and politicians have now been overtaken by reality. The German economy got stuck in the fourth quarter. The Federal Statistical Office reported “growth” of 0.0279 percent compared to the previous quarter.

Source: WORLD infographic

Germany is now in dangerous stagnation. Because the figures for the fourth quarter do not yet include the economic consequences of the coronavirus epidemic. They should hit export-heavy Germany with full force in the first quarter. This could lead to a minus in the opening quarter of 2020. In two negative quarters in a row, economists speak of a recession.

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BEIJING, CHINA - FEBRUARY 13: A Chinese woman wears a protective mask as she waits for a bus at a usually busy stop on February 13, 2020 in Beijing, China. The number of cases of the deadly new coronavirus COVID-19 rose to more than 52000 in mainland China Thursday, in what the World Health Organization (WHO) has declared a global public health emergency. China continued to lock down the city of Wuhan in an effort to contain the spread of the pneumonia-like disease which medicals experts have confirmed can be passed from human to human. In an unprecedented move, Chinese authorities have maintained and in some cases tightened the travel restrictions on the city which is the epicenter of the virus and also in municipalities in other parts of the country affecting tens of millions of people. The number of those who have died from the virus in China climbed to over 1300 on Thursday, mostly in Hubei province, and cases have been reported in other countries including the United States, Canada, Australia, Japan, South Korea, India, the United Kingdom, Germany, France and several others. The World Health Organization has warned all governments to be on alert and screening has been stepped up at airports around the world. Some countries, including the United States, have put restrictions on Chinese travelers entering and advised their citizens against travel to China. (Photo by Kevin Frayer / Getty Images)

“The corona virus poses a risk to the global recovery, as hopes rest on a recovery in the Chinese economy,” said Stefan Schneider, economist at Deutsche Bank. This factor should cost German growth in the first quarter 0.2 percentage points. He expects German gross domestic product (GDP) to shrink by 0.1 percent between January and March.

In the fourth quarter, industry pulled German GDP growth into the deep. In December alone, industrial production slumped by 3.5 percent. It was the biggest minus since the financial crisis and the fifth drop in seven months. At the same time, incoming orders in the manufacturing sector do not signal a rapid recovery. In December, 2.1 percent fewer machines and other industrial products were ordered from companies in Germany. Abroad, in particular, is becoming more reserved. Exports rose by only 0.1 percent in December after a minus of 2.2 percent in November.

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11/12/2019, North Rhine-Westphalia, Dusseldorf: Dark clouds are moving over a Mercedes star that stands on the roof of the Mercedes-Benz Sprinter plant. A traffic light next to it lights up red. According to the works council, 1,100 jobs at various management levels will be lost at Daimler worldwide. Photo: Horst Ossinger / dpa | Use worldwide

The German GDP figures reveal that growth in domestic consumption, construction and government expenditure is no longer sufficient to overcome the gravitational forces of industry. Even the surprisingly robust labor market can hardly isolate Germany from the global harsh conditions. “The German economy is becoming more and more fragile,” comments German banker Schneider.

Euro falls to three-year low

The financial markets reacted differently to the numbers. The euro fell to $ 1.0830, its lowest level in three years. The German stock index opposed this Dax even slightly too. Obviously the relief here outweighed the fact that Germany’s GDP did not drop in the fourth quarter.

In fact, Germany’s export-oriented economy could once again have fuss and avert the recession. In the past 18 months, the economy has narrowly averted the evil “R word” twice. Since the third quarter of 2018, when German GDP contracted for the first time after a long period of growth, the German economy has practically not been growing properly.

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The growth weakness hits Germany at a very bad time. After the announced resignation of CDU chairwoman Annegret Kramp-Karrenbauer, the federal government seems even less able to act. Economists see the risk that the CDU could look after itself rather than the country’s economy.

The German economy sees the weak economic data for the end of 2019 as a “warning for the current year”. The German export industry and thus many key branches of industry continued to struggle with the serious trade conflicts and the as yet unresolved consequences of Brexit, said DIHK CEO Martin Wansleben. “In addition, the effects of the corona virus are still not foreseeable, but still cause uncertainty among internationally active German companies.” Wansleben called for relief signals from politicians in Germany: “Accelerated planning for investment projects and tax cuts should be at the top of the federal government’s agenda . “

Germany experienced the last recession in the winter quarters of 2012/2013. It was relatively easy. The unemployment rate rose only slightly from 6.8 to 6.9 percent. At that time, however, strong economic growth set in quickly and made German worries disappear. No economist expects that today. Not only the consequences of the coronavirus are an incalculable risk. The uncertainty surrounding Brexit could also result in forecasters soon having to adjust their forecasts again.

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