Is German Economy on the Verge of Recession?
Economists expect that Europe’s biggest economy will fall in August, but more than they anticipated.
Germany is widely respected for its export-led economy and is one of the leading exporters worldwide. It exports automobiles, machinery, chemicals and industrial equipment as some of its key export products. Major trading partners for Germany include France, the US, China and the UK among others.
German exports play an invaluable role in its economy, creating jobs and driving economic expansion. Germany’s renown for producing top-quality goods and its robust manufacturing sector are key contributors to its export success. Additionally, the German government and various trade organizations actively support and promote exports – helping German businesses expand into global markets.
German Economy: Decreased Export, Increased Import
On Thursday, official data revealed by Destatis, that German exports dropped more than expected. The country’s total exports are €127.9 billion ($134.5 billion), a drop of 1.2% from the previous month. Imports, on the other hand, rose to 16.8% in August year-on-year. Germany’s trade surplus soared a little to €16.6 billion.
“Like the rest of the German economy, exports remain stuck in the twilight zone between recession and stagnation,” said ING bank economist Carsten Brzeski.
At the start of the year, the German economy entered a recession and slumped in the second quarter. A profusion of weak economic data indicates the country has stayed confined in idleness.
The August adversity was led by a 2.6% drop in exports to the neighbouring eurozone countries. According to the International Monetary Fund, Germany will be the sole major advanced economy to dwindle this year.
The United States is the leading destination for “Made in Germany” goods. US shipments dived by 1.3% month-on-month. Ascending inflation rate, industrial downturn and weaker market from China plague Europe’s economic marketplace in previous months.
Diminishing Worldwide Demand Complicates Structural Concerns
Consecutively, August was the second month to exhibit a drop in exports. It followed a downward-revised 1.9% decline in July.
“As a result, trade is no longer the strong resilient growth driver of the German economy that it used to be, but rather a drag,” said Brzeski.
Aside from China, exports to nearly all destinations related to German companies fell in August. It marked a 2.6% dip in eurozone exports. Exports to the US fell by 1.3%, exports to Russia dropped by 0.5%, while exports to China grew to 1.2%.
“Ultimately, the weak exports should not come as a surprise, as the global export volume has now been stagnating for two years. Exports were already clearly in reverse in July, and now we have to accept a significant decline in August as well,” said VP Bank chief economist Thomas Gitzel.