There are many different factors in the deterioration of German economy, including Brexit (Image via: msn.com)

German Economy Shrinks Amid Its Export Slowdown

Kirana Chandra Mumpuni Budiana
Market & Investment
Export Import
Aug 15, 2019
5086
The recent report stated German GDP had decreased 0.1 percent which marks the end of a golden decade in its economy, according to Carsten Brzeski, chief economist in Germany at the Dutch bank ING. This is not a small disappointment because Germany is the world's fourth largest economy and Europe's biggest. Brzeski said that uncertain climate in global economic situation becomes the top factor. It dented sentiment and hence economic activity. The Federal Statistics Office made even more clear by pointing out that the causes of German GDP decrease are the country’s export slowdown and a decline in construction investment.

There’s a decline in demand for autos globally. The German car demands is hugely important for the country. The decline is happening mostly in China where new car sales have dropped 13 months in a row. German carmakers, including BMW (BAMXF), Daimler (DDAIF) and Volkswagen (VLKAF), are having a hard time since China is the world's largest market for vehicles. The chief of German economist at Oxford Economics, Oliver Rakau, said that this situation is really bad for German. That is because Germany's automakers intend to make big investments in building cleaner cars. The export of other German goods in China meets the same fate. The trade dispute between China and U.S. is allegedly a part of the problem. Meanwhile, in construction area, the output fell 1.1 percent in the second quarter.

Brexit can also harm German economy this year. The chief Europe economist at Capital Economics, Andrew Kenningham, revealed that there may be another push to German exports for the UK before the next Brexit deadline. However, Kenningham and the analysts suspect if any pre-Brexit boost would be smaller than it was in the first quarter. If UK actually does leave EU without any deal, this would be the sign of a larger hit to external demand towards the end of the year.

Source: https://edition.cnn.com/2019/08/14/business/germany-economy-gdp/index.html

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