German manufacturing output fell by 1.9% between October and November 2018. The figures released by Germany’s Federal Statistics Office have stoked fears of recession for the eurozone’s strongest economy.
Brandenburg Gate by night, Berlin. Photo: Stacey MacNaught. Licence: CC BY
Brandenburg Gate by night, Berlin. Photo: Stacey MacNaught. Licence: CC BY
This third consecutive month of decline is a reminder that Germany, like all economies, is vulnerable to factors such as trade wars or global manufacturing slowdowns. If there were a further fall in the fourth quarter of the financial year then the country would technically enter a recession. This would be bad news for the eurozone’s growth forecast, as Germany generates around one-third of all output in the region.
Economic expansion across the eurozone as a whole slowed in 2018 following a particularly strong 2017.
Chris Williamson, chief business economist at IHS Markit, the data firm which compiles the Purchasing Managers’ Index, said: “Everyone was expecting growth to rebound in the fourth quarter, but that rebound no longer looks likely to be strong.
“There is certainly a chance that there will be a stronger rebound in the first quarter instead, but a number of factors – such as the trade war, the China slowdown, as well as the general view that the recovery now looks past its peak – are weighing on sentiment and that could have longer-lasting effects. There is the potential for a vicious circle here.”
And others are cautiously hopeful that a real recession is not on the horizon. Isabel Schnabel, a member of the Council of Economic Experts, which advises the German government, said: “I am pretty sure we will have to downgrade our German GDP forecast for 2019 from the 1.5% that we have at the moment. But I still think we will stay above 1% [for the year], there is no real sign of a recession.”
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