Bundesbank: Germany may be in recession already
Brexit uncertainty, trade wars and climate change concerns hit German car industry
Germany’s central bank has warned the country has most likely entered a recession for the first time in six years.
The Bundesbank said the German economy contracted for the second consecutive quarter, following a 0.1 per cent decline in GDP in Q2.
In its monthly report the bank stated: “The decisive factor here is the continued downturn in the export-oriented industry.”
The German automobile market has faced increasing disruption this year. Car manufacturing has fallen 12 per cent, with exports dropping 14 per cent.
Increased consciousness of climate change has damaged its domestic image and sales, alongside new emissions regulations.
Internationally, the Sino-American trade war has reduced the interest in German-made cars in Asia. China is the second biggest market for German cars, importing almost €24bn ($26.71bn) worth of German automobiles in 2018 alone.
Britain is its third largest market, imported €22.5bn (£20bn, $25.04bn) worth last year. Ongoing Brexit uncertainty has affected German car manufacturers less able to plan investments and production.
Confirmation of a recession will not be available until November 14 when the federal statistics agency publishes the Q3 official economic figures.
Although a technical recession seems likely, Germany has been under pressure from the European Central Bank, the International Monetary Fund and other eurozone countries to halt the looming economic slowdown through increased investment and spending.
Its partners argue that unlike many European countries, Germany has the budget surplus and must therefore foot the bill to reduce continent-wide economic decline.
Data released from Eurostat, the European Union’s statistics office, showed that Germany’s budget surplus stood at 3.2 per cent of GDP in Q2, up from 2.2 per cent in Q1. Adjusted for seasonal swings it stands at 1.7 per cent down from 2.0 per cent, still an impressive figure.