Europe’s economy – Is a recession inevitable? | Made in Germany
Germany’s industrial output fell more-than-expected in June on weaker production of intermediate and capital goods, further sign that Europe’s largest economy contracted in the second quarter as exporters became caught up in trade disputes..
«The continuing decline in production is daunting», – said Alexander Kruger, economist at Bankhaus Lampe, adding that the recession in the manufacturing sector is likely to continue due to the escalation of the trade dispute between China and the United States..
Both countries are important export destinations for German producers, which means that tariff disputes between the world’s two largest economies have a disproportionate impact on German producers of goods..
«The longer this goes on, the more likely other sectors of the economy will be drawn into it. Growth forecasts for Germany are likely to be cut further», – said Kruger.
The Ministry of Economy reported that in the second quarter, industrial production decreased by 1.8% compared to the previous quarter, driven by a sharp drop in the production of metals, mechanical engineering and the automobile industry..
«Industry remains in recession», – reported in the ministry. Construction production fell 1.1% in the second quarter, while energy production fell 5.9% in the same period.
The data comes after German industrial orders on Tuesday beat expectations in June, but the Economy Ministry warned that the sector has not yet reached a turning point as a slowdown in the global economy, disputes over international trade and uncertainty over Brexit materialize..
Commerzbank economist Ralph Solvin said industrial data support expectations that the German economy will contract slightly in the second quarter and that manufacturing output is likely to decline in the coming months..
«Sector-specific analysis shows that the crisis in the automotive sector continues, Solvin said, adding that car production has not recovered from the downturn caused by problems related to the transition to a new emission measurement standard last year..
«However, the main reason for this weakness at present is likely to be significantly weaker external demand.», – said Solvin.
German government expects economy to grow a meager 0.5% this year and recover with 1.5% growth in 2020.
DekaBank’s Andreas Scheuerle said industrial data show the economy contracted 0.2% in the second quarter after growing 0.4% in the first three months of the year..
«We assume this is a prelude to a tech downturn.», – added Scheuerle. A technical downturn is usually defined as the result of a contraction in the economy for at least two consecutive quarters..
Federal Statistical Office To Release Preliminary Gross Domestic Product For April-June Period Next Wednesday.