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22nd Jan 2021

Germany on brink of recession as exports tumble

Germany is on the brink of recession after recording its weakest export levels for five years.

Data published by the Federal Statistics Office on Thursday (9 October) indicated that exports slumped by 5.8 percent between July and August, the sharpest monthly fall since 2009, at the height of the financial crisis.

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  • Germany's economy is on the brink of recession, with analysts urging Merkel's government to boost public spending (Photo: regioblogview)

Imports also fell by 1.3 percent, suggesting that German consumers are also losing faith in the country's economy.

In a statement, the statistics office blamed late-falling summer vacations in some German regions and the Ukraine crisis for the fall in exports and imports.

The dismal statistics are the latest sign that Germany is facing an economic slowdown.

In August, the ZEW think-tank’s index of financial market confidence, a trusted indicator of German economic sentiment, hit its lowest level since December 2012.

The fall was attributed to the weak eurozone and fears about the EU's ongoing sanctions battle with Russia.

According to Eurostat, the EU's data office, Germany's output fell by 0.2 percent between April and June, after expanding by 0.8 percent in the first three months of 2014.

On Thursday, four of the country's top economic institutes urged chancellor Angela Merkel to increase public spending in a bid to stoke the economic engine.

"On the spending side, public spending should be increased in those areas which can potentially boost growth," the IFO institute in Munich, DIW of Berlin, RWI of Essen and IWH of Halle said in a joint report.

“After gross domestic product contracted in the second quarter and likely stagnated in the third quarter, the economic engine is finding it difficult to get going,” they added.

At a news conference in Berlin, DIW's Ferdinand Fichter called on the government to make "sufficient use of the margin for financial manoeuvre with regard to investment, such as in infrastructure".

He added that a balanced budget "isn't necessarily an end in itself from an economic point of view."

The EU commission, along with US treasury secretary Jack Lew and numerous EU counterparts, continue to urge Germany to shift its focus from trade surpluses, arguing that increasing public investment and wage levels would stimulate demand and higher growth across the bloc.

As the eurozone's powerhouse, the effect of a German recession would be felt across the bloc.

Economic growth across the 18 countries using the single currency was flat in the second quarter and the bloc is likely to record anaemic growth rates this year.

For their part, the IMF forecast earlier this week that the eurozone economy would grow by 0.8 percent in 2014, rising to 1.3 percent next year in its annual economic outlook report. It also warned that the currency area faced the threat of a triple-dip recession.

But despite the threat of recession, Germany still recorded a trade surplus of €17.5 billion in August, taking its total surplus in the first eight months of this year to €137 billion.

Meanwhile, exports totalled €743.6 billion between January and August, just over €20 billion higher than the same period in 2013.

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