The GDP growth for the second quarter has taken a huge hit as global uncertainty hits the economy of Germany. The GDP for the second quarter ending June has come down by 0.1 percent, compared with the previous quarter, according to the Federal Statistics Office, in line with analysts’ expectations. This brings the annual growth rate lower to 0.4 percent. Germany which has been enjoying good growth for the past ten years has taken a huge hit, say analysts. The third quarter is even more ominous. The country is teetering on the verge of a recession, says Andrew Kenningham, chief economist at Capital Economics at Europe.
The German economy depends on exports for its revenue. As most of its products are exported to the U.S. and China, the German empire has been hit by the trade war that is raging between the two countries for about a year. The auto sector has also been brutally shattered with the Brexit issue hitting the carmakers of the country. The German BMW (BAMFX), Volkswagen (VLKAF) and Daimler (DDAIF) which depend on China as its chief market have seen a huge fall in sales, with the slowdown occurring in China. A fresh round of tariffs that is effective from September 1 may further dampen the global supply chain which is already fragile. Cell phones, video game consoles, and toys may also fall in the tariff net soon.
The European Central Bank is to meet in September and economists expect the central bank to cut interest rates to bolster the economy. Further, economists expect the ECB to buy bonds again as another measure of stimulation. Chancellor Angela Merkel, however, feels that further stimulus is not necessary. A government spokeswoman has said that the fiscal policy already in place by the German government is expansive enough. Right measures will help Germany avoid a recession says Peter Altmaier, the German Economy Minister.
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