Fx trading news: Germany's economic downside risks increase, and the first quarter of this year will continue to slump!
2020-02-20 10:35 from：CAPSTONE author：Jack
Capstone forex trading news: The Bundesbank released its monthly report on February 17, predicting that the German economy will continue to be depressed in the first quarter of this year. The German Federal Bureau of Statistics previously released data, saying that Germany ’s gross domestic product (GDP) growth in the fourth quarter of 2019 was zero, and the annual growth rate was only 0.6%, which was much lower than the 1.5% in the same period in 2018 and 2.5% in 2017.
The weak economy has increased fears of a recession in Germany and the euro zone. Under the influence of the continued sluggish export and more uncertain factors, the German economy is still facing the risk of recession this year. In response to the economic downturn, the German government is expected to adopt a more active fiscal policy.
The overall performance of the export industry, which is one of the pillars of the German economy, was sluggish. According to statistics from the Federal Statistics Office, German exports last year were 1.33 trillion euros, a year-on-year increase of only 0.8%, while German exports in 2017 and 2018 increased by 6.2% and 3.0%, respectively. Last year, after the German economy grew slightly by 0.5% in the first quarter, it shrank by 0.2% in the second quarter, and stopped the decline in the third and fourth quarters.
In export-oriented industries, export trade in industrial fields represented by machinery, electronics and automobiles has declined. Statistics show that in December 2019, German industrial output fell by 3.5% month-on-month and 6.8% year-on-year. German manufacturers experienced a decline in orders for 8 months throughout the year, and the number of orders fell by 8.7%, the highest since the international financial crisis in 2008 Poor performance. The German Federal Ministry of Economic Affairs stated: "The continued downturn in industrial development and the decline in the number of production orders indicate that the German economy is facing downside risks."
The Bundesbank analysis believes that factors such as trade disputes and the UK ’s “Brexit” have led to a reduction in global demand, which has brought a huge impact on German industry. In particular, the auto industry, which plays an important role, not only has declined orders, but also faces multiple blows from the upgrade of EU emissions regulations, the rise of electric vehicles, and the threat of US tariffs. The German Automobile Industry Association predicts that the global automotive market sales will fall by 5% in 2019 and will continue to decline in 2020. The German IFO Economic Institute estimates that the poor performance of the automotive industry sector in 2019 will bring a 0.75% loss to German GDP. German car companies such as Volkswagen, BMW, Daimler, and parts suppliers such as Bosch and Brose have announced job cuts.
Nevertheless, Germany's economic performance is not without its bright spots. Household consumption continues to grow. Last year, German personal consumption expenditure increased by 1.6%, which was significantly higher than the previous two years. This partially offset the loss of foreign trade exports. At the same time, the real estate industry, service industry and public utilities also steadily increased. The German "Business News" reported that the trade, logistics, hotel catering, nursing and construction sectors are hiring a large number of employees, "even if the industry is weak, there will be no work in Germany. As a result, the overall unemployment rate has not been affected much, and it is expected to rise only slightly from 5% to 5.1%.
Some economists believe that Germany's strong industrial base and abundant fiscal surplus will help it meet economic challenges. At present, the German government's fiscal revenue has maintained a surplus for six consecutive years. Last year, federal, state, town, and social insurance agencies had a surplus of 49.8 billion euros, or about 1.5% of GDP. The outside world has frequently called on the government to increase fiscal stimulus, but the German government is cautious about this.
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