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Fears of recession as German economy shrinks

Written by on 14/08/2019

Germany’s economy shrank in the second quarter of this year as fears of a recession mount.

Gross domestic product (GDP) fell 0.1% between April and June and annualised growth rate slowed to 0.4% in the second quarter from 0.9% in the first with several economists raising fears of another contraction in the third quarter.

Data from Federal Statistical Office showed that manufacturing in the country slid into reverse as global growth slows down.

Andrew Kenningham from Capital Economics said: “The bottom line is that the German economy is teetering on the edge of recession.”

Cars ten Brzeski from ING said: “Today’s GDP report definitely marks the end of a golden decade for the German economy.

“It was a decade of strong growth on the back of earlier structural reforms, fiscal stimulus, localisation at its peak and steroids provided by the ECB in the form of low-interest rates and a relatively weak euro.”

A recession is defined as two consecutive quarterly contractions.

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Germany’s export-reliant economy has been particularly hit by the slowdown in the global economy and has been amplified by the US-China trade war and uncertainty over Brexit.

Stock and bond markets have reacted negatively to the data with the multiple recession indicators.

The interest on both US and UK 10-year government debt fell below the yield on the two-year bonds, traditionally a sign that some investors think a recession is nearing.

The UK’s FTSE100 as well Europe’s STOXX 50 fell by 1%

 Sky News

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