Link: http://www.rttnews.com/story.aspx?Id=2972715
While many rumors spread about a possible upcoming recession in the US, Germany is experiencing warning signs of its own. In the above article, the author discusses how certain economic indicators have dropped more quickly than anticipated in Germany. Their Business Climate Index fell to its lowest level (99.1) since 2016 and many are stating that this is the first time business expectations have turned pessimistic since 2012. This is also the first time that the German economy has shrunk since 2015 and is falling at a rapid rate.
There are many factors putting pressure on the German economy; one of the largest being Brexit. The result of Brexit will most likely determine how long Germany stays in this downturn. As of right now, The Economy Ministry is expecting the German economy to pick up fairly quickly again and grow in 2019 as the construction industry sees large growth and tax cuts are put in place to increase consumer spending.
With much of the news focused on the US at the moment, it is interesting to see what is going on in other countries and how other economies are holding up. The German economy is very important for the EU and it is concerning that they might be going into a recession. I think it will be very interesting to see the effects of Brexit as well as a possible US recession on other economies.
6 comments:
Caroline, it is definitely worth noting that two of the worlds most important economies are experiencing some troubling times. Not only is the US having difficulty with the shutdown recently being lifted, but that is also lowering Consumer Confidence in the US as well. According to the University of Michigan Consumer Sentiment data, we are also at our lowest point since Trump was elected. Hopefully both economies can find a way to maintain stability and do their best to level off recession possibilities.
This is a very interesting article in that it does not look at the overall US economy. I think it is pretty interesting that Brexit is having a big effect on not only the British economy, but all of those that are participating in the EU. As Antonio said, it is very important to note that two of the worlds most successful economies are seeming to go toward a downturn around the same time. Hopefully, the United States and Germany will be able to fix this moving forward.
Caroline,
I am glad you had posted about Germany's position. I am interested to know actual percent changes for these variables, as well as whole number changes, with a comparison across years. Many times the presentation of statistics in a certain way illustrates a worse situation than what is actually occurring. However, I am sure Germany and England will be able to agree to new deals as soon as Brexit has run its course. The world economy has been in uncharted territory, causing speculation and doubt from each world power. I am interested to see how things play out.
Caroline, thank you for sharing your thoughts and providing a more global perspective about the economic environment! The backdrop to the German economy does not look promising as mentioned, and as such a strong and stable European economy, this is definitely of concern. According to the financial times, Germany stated a "cooling" growth forecast from 1.8% to 1.0%. I would be curious to know about their labor index and the strength of their consumer confidence statistics because these could provide greater color to what appears to be a slowing economy.
Caroline,
I find it interesting that a security approach was not taken in this article. Aside from the US, Germany puts more money into NATO funding than any other member state. With relatively lax rules surrounding NATO funding, it could be possible for Germany to redirect some funds that would go towards collective security into areas that would need them more during a possible recession. The implications of that could be very interesting. With Russia turning more towards breaking ice in the arctic and acquiring a new warm water port without Turkey to deal with, even a small hit to NATO funding could prove important. The UK recently put a few billion pounds into a new series of Trident submarines, mostly, according to the Royal United Services Institute, in an effort to deter Russian advancement into the north Atlantic. Do you think Germany will have the economic strength to continue funding NATO at such a high level if their economy falls on harder times?
I agree that since Germany’s economy seems headed towards an economic downturn, the uncertainty is lowering consumer confidence. This is putting unrest in German businesses, negatively affecting the overall amount of investments and consumption happening in the economy. This leads to lower growth rates. I agree that it would be interesting to see how the EU would manage without the UK as they are major contributors to the EU.
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