German Economic Output Declines


German EconomyThe German economy is the powerhouse of both the EU and the slightly smaller Eurozone (28 nations vs 19). It is the third largest exporting nation in the world, behind the USA and China. The fact that so much of German production is sold in other markets makes the German economy more vulnerable than many nations to slow downs in the global economy and the knock-on effects of Donald Trump’s various trade wars.

Concerns are being expressed over the current state of the German economy. Industrial output was down by 1.9% in April over the march figure and exports have softened by 0.5% year-on-year.

The German central bank, the Bundesbank, has trimmed its expectations for full year growth in 2019 to 0.6%, markedly lower than the projection of 1.6% it made in December of last year. The Bank thinks that GDP will shrink in Q2, before recovering next year.

China is a significant trading partner for Germany and inevitably, trade tensions between it and the USA have had a deleterious effect on Sino-German trade. The Bundesbank points out that the US trade disputes are having a negative effect on global trade more generally.

Europe has been directly affected by the US’s decision to levy tariffs on aluminium and steel products which the States imposed on the grounds of “national security”. Trump has also threatened to levy tariffs against European cars imported into the USA, many of which are produced in Germany.

The general global trade situation will be a factor in a change f stance from the ECB which has indicated that its policy of ultra-low interest rates will remain unchanged for at least six months more than anticipated in its previous forwards guidance statements. Rates are unlikely to move higher before the middle of 2020 under the current advice. The ECB’s Mario Draghi explained the decision as being a response to the Eurozone’s low inflation rate which stands at 1.2%, well below the ECB’s target figure of 2%.

Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.