GERMANY could tumble into its first recession in six years as Brexit and Trumps global trade wars hammer the EUs largest economy.
In a major blow for Chancellor Angela Merkel, the country’s central bank said the economy may have contracted for the second consecutive period in the three months to September.
The eurozone’s largest economy has slowed sharply in the past year as its traditional engine of growth – exports – bore the brunt of a global trade war.
Car production – one of Germany’s best known exports – was “greatly reduced” in July and August.
‘MOST LIKELY’
The report reads: “Germany’s economic output could have shrunk again slightly in the third quarter of 2019.
“The decisive factor here is the continued downturn in the export-oriented industry.”
Warning that this downturn was starting to cast a shadow on the rest of economy, the bank adds: “Early indicators currently provide few signs of a sustainable recovery in exports and a stabilisation of the industry.”
The German economy declined 0.1 per cent in the three months to June and has shown few signs of improvement, with the next official figures due to be published on November 14.
Experts believe a recession, defined as a period of two consecutive quarters of negative growth, could be on the cards.
Marcel Fratzscher, the president of the research institute DIW Berlin, told the BBC that he believes Germany’s first recession since 2013 could be underway.
“Most likely we will see another quarter of negative growth, and that’s by definition a technical recession,” he says.
He forecast the economy to shrink by 0.1% between July and September.
“It’s very mild, but also at the same time, not a very strong performance,” he said.
In August the bank warned that lower consumer spending and softer overseas demand had caused the economic downturn.
It also said Brexit and the trade war between the US and China were among the factors that contributed to the most recent downturn.
The US has threatened to impose extra tariffs on European-made cars, which would hit German makers such as BMW and Mercedes-Benz hard.
Last year Donald Trump joked that he’d “put a 25 per cent tax on every car that comes into the United States from the European Union”, though he has not elaborated further.
Germany accounts for more than a quarter of the EU’s output, with its 83 million people.
Many of the bloc’s countries count Germany as their number one trading partner, includingFrance, the Netherlands, Belgium, Slovakia, Sweden and Italy.
Merkel has previously spoken of how Britain’s decision to go it alone had caused her “great regret”.
The long-term former leader of the Christian Democrats., Merkel will want to see Germany hold on to centre stage before she steps down as Chancellor in 2021.
