Germany Moving Towards Recession - Could Have Repercussions For Eurozone And U.S.

Wide implications as Germany teeters toward recession

Germany, Europe’s industrial powerhouse and biggest economy, with companies like Volkswagen, Siemens and BASF, may be entering a recession, according to a gloomy report from the country’s central bank Monday — a development that could have repercussions for the rest of the eurozone and the United States.

A technical recession is defined as two consecutive quarters of negative growth, and Germany saw a 0.1% drop in the April-to-June period. In its monthly report, the Bundesbank said that with falling industrial production and orders, it appears the slump is continuing during the July-to-September quarter.

“The overall economic performance could decline slightly once again,” it said. “Central to this is the ongoing downturn in industry.”

Deutsche Bank went further Monday, saying “we see Germany in a technical recession” and predicting a 0.25% drop in economic output this quarter.

Germany’s economy is heavily dependent on exports, and the Bundesbank said the trade conflict between the U.S. and China and uncertainty about Britain’s move to leave the European Union have been taking their toll. Both the U.S. and China are among Germany’s top trade partners, with Britain not far behind.

In addition, Germany’s auto industry __ with giants like Volkswagen, Daimler and BMW — faces challenges adjusting to tougher emissions standards in Europe and China and to technological change as demand grows for electric vehicles. Germany is also home to such major corporations as Bayer, Merck, Linde and the ThyssenKrupp Group.

The Bundesbank report is in line with a consensus among economists that “the risk of another quarter flirting with recession is high,” Carsten Brzeski, the chief economist for ING bank in Germany, told The Associated Press.

Amid the trade conflict between Washington and Beijing, the increasing prospect of Britain leaving the EU without an exit agreement, and growing fears that countries may race to devalue their currencies, the monthly ZEW poll of German investors fell to its lowest level last week in over 7½ years.

“The ZEW indicator of economic sentiment points to a significant deterioration in the outlook for the German economy,” said Achim Wambach, president of the Mannheim-based institute.