Latest Numbers from Germany Confirm Recession

By:  Bob Adelmann
01/09/2012
       
Latest Numbers from Germany Confirm Recession

The announcement from the German Economy Ministry over the weekend confirmed that the long-awaited European recession has officially begun: German factory orders dropped to the lowest level in three years, down nearly five percent in the past month. The ministry also revealed that orders from outside the EU dropped by 10.3 percent.

Said Jennifer McKeown, an economist at Capital Economics Ltd. in London, “It’s quite clear that we’re heading into a pretty sharp downturn in Germany, which has been one of the strongest of the euro zone’s economies. Orders are very clearly on a downward trend, as is industrial production itself.”

The German economy is the fourth largest in the world, generating nearly $3.5 trillion in goods and services annually. Most of its trade is inside the eurozone, resulting in its position as the second-largest exporter in the world. Despite its strong economy relative to its neighbors, its debt-to-GDP ratio is 142 percent, and it is running an annual deficit of almost nine percent of GDP. It nevertheless retains its AAA rating from the three major credit rating agencies, which is strong enough compared to its eurozone partners to have caused a strange anomaly in the markets: yields on its six-month bonds have gone negative.

The announcement from the German Economy Ministry over the weekend confirmed that the long-awaited European recession has officially begun: German factory orders dropped to the lowest level in three years, down nearly five percent in the past month. The ministry also revealed that orders from outside the EU dropped by 10.3 percent.

Said Jennifer McKeown, an economist at Capital Economics Ltd. in London, “It’s quite clear that we’re heading into a pretty sharp downturn in Germany, which has been one of the strongest of the euro zone’s economies. Orders are very clearly on a downward trend, as is industrial production itself.”

The German economy is the fourth largest in the world, generating nearly $3.5 trillion in goods and services annually. Most of its trade is inside the eurozone, resulting in its position as the second-largest exporter in the world. Despite its strong economy relative to its neighbors, its debt-to-GDP ratio is 142 percent, and it is running an annual deficit of almost nine percent of GDP. It nevertheless retains its AAA rating from the three major credit rating agencies, which is strong enough compared to its eurozone partners to have caused a strange anomaly in the markets: yields on its six-month bonds have gone negative.

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Photo: Entrance to the Deutsche Bank trading floor in Frankfurt

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