Wide implications for euro zone as US-China trade war, Brexit leave Germany on edge of recession

Germany saw a 0.1 per cent drop in the April-to-June period, and it appears the slump is continuing, according to the country’s central bank

Heavily dependent on exports, the central bank says the US-China trade conflict and Britain’s plan to leave the European Union have taken a toll

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Cooling towers of the Jaenschwalde lignite-fired power plant in Germany. Photo: Reuters

Published: 10:55am, 20 Aug 2019Updated: 7:23pm, 20 Aug 2019

Germany, Europe’s industrial powerhouse and biggest economy, with companies like Volkswagen, Siemens and BASF, may be entering a recession, according to a gloomy report from the country’s central bank – a development that could have repercussions for the euro zone and United States.

A technical recession is defined as two consecutive quarters of negative growth, and Germany saw a 0.1 per cent drop in the April-to-June period. In its monthly report released Monday, the Bundesbank said that with falling industrial production and orders, it appears the slump is continuing during the July-to-September quarter.

“The overall economic performance could decline slightly once again,” it said. “Central to this is the ongoing downturn in industry.”

Deutsche Bank went further, saying “we see Germany in a technical recession”, and predicting a 0.25 per cent drop in economic output this quarter.

Germany’s economy is heavily dependent on exports, and the Bundesbank said the trade conflict between the US and China and uncertainty about Britain’s move to leave the European Union have been taking their toll. Both the US and China are among Germany’s top trade partners, with Britain not far behind.

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