Germany slumps into recession, data forecast to show

November 13th, 2008 - 12:04 pm ICT by IANS  

Berlin, Nov 13 (DPA) Germany slumped into a recession during the third quarter, data to be released later Thursday is forecast to show, amid signs that a global economic downturn was taking hold.Europe’s biggest economy shrank by 0.1 percent in the third quarter, analysts predict Thursday’s figures from Germany’s statistics office will show after it contracted by 0.5 percent in the quarter to end June.

As a result, Germany will fulfil the technical definition of recession after clocking up two consecutive quarters of negative rates.

Data to be published on Friday is also predicted to show France - the 15-member eurozone’s second biggest economy - also slipped into recession during the third quarter.

With the eurozone’s two largest economies in recession, the European Central Bank is likely to face mounting pressure to follow up this month’s 50-basis-points cut with another hefty reduction in borrowing costs in December.

Last week, Germany’s Economic Ministry said the nation’s factory orders plummeted in September by a dramatic 8 percent to record their biggest drop since records began about 17 years ago, while industrial production sank 3.6 percent in September.

However, German exports posted a modest month-on-month rise of 0.7 percent in September as a weaker euro helped to boost foreign orders for the world’s leading export nation.

But in their annual report presented to Chancellor Angela Merkel in Berlin Wednesday, the German government’s panel of economic advisers predicted that exports will drop sharply in the coming year as the world economy slows.

The panel expects German exports to edge up by 0.4 percent next year with imports to rise by 0.5 percent. This follows a 4.2-percent rise in exports last year and a 3.4-percent increase in imports.

However, a key sentiment indicator released this week showed German investor confidence rebounding from record lows to post a surprise increase in November amid government and central bank moves to shore up the economic outlook.

Drawn up by the Mannheim-based Centre for European Economic Research, the ZEW index rose to minus 53.5 rebounding from minus 63 in October as signs emerged that an element of calm has returned to global share markets after weeks of chaotic selling.

“The earlier pessimistic expectations of the financial market experts are confirmed by the current economic development in Germany,” says ZEW President Wolfgang Franz releasing the survey.

“The experts, however, seem hopeful that the collective actions of governments and central banks will mitigate the economic slowdown,” he said.

In their report, the panel of advisers called on the government to announce additional stimulus measures to the ones so far announced.

“We must give answers to the marked economic slowdown,” said panel chairman Bert Ruerup.

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