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Germany's economy shrinks, fuelling fears of a recession - business live Germany's economy shrinks, fuelling fears of a recession - business live
(32 minutes later)
The UK and Germany - Europe’s largest economies - were also its worst-performing members in the second quarter of this year.
They, along with Sweden, were the only countries to suffer a contraction in April-June.
Italy performed poorly too, with no growth, while France and Belgium managed lacklustre growth of 0.2%
Here are some highlights from today’s growth report from Eurostat (which includes today’s German GDP data, and last week’s UK GDP)
Poland: Grew by 0.8% in Q2, quarter-on-quarter
Portugal: Grew by 0.5%
Spain: Grew by 0.5%
Netherlands: Grew by 0.5%
Belgium: Grew by 0.2%
France: Grew by 0.2%
Italy: Stagnated
Sweden: Contracted by 0.1%
Germany: Contracted by 0.1%
The UK: Contracted by 0.2%
The Eurozone: Grew by 0.2%
The EU: Grew by 0.2%
NEWSFLASH: Growth across the euro area halved in the last quarter, from 0.4% to 0.2% in Q1, as Germany’s contraction held the region back.NEWSFLASH: Growth across the euro area halved in the last quarter, from 0.4% to 0.2% in Q1, as Germany’s contraction held the region back.
That’s according to data firm Eurostat, and matches its initial estimate of eurozone GDP released at the end of July.That’s according to data firm Eurostat, and matches its initial estimate of eurozone GDP released at the end of July.
The wider EU also only grew by 0.2%, down from 0.5% in January-March.The wider EU also only grew by 0.2%, down from 0.5% in January-March.
More to follow...More to follow...
The jump in UK inflation to 2.1% last month could spur the Bank of England to raise interest rates, despite Brexit uncertainty.The jump in UK inflation to 2.1% last month could spur the Bank of England to raise interest rates, despite Brexit uncertainty.
My colleague Richard Partington explains:My colleague Richard Partington explains:
City economists had forecast CPI to fall to 1.9% - instead, it’s now over the Bank’s target of 2%.City economists had forecast CPI to fall to 1.9% - instead, it’s now over the Bank’s target of 2%.
The unexpected rise could pile pressure on Threadneedle Street to raise interest rates, even as economic growth falters, in a potential sign the UK could begin to mirror the stagflation of the 1970s - when growth stalled yet inflation continued to rise.The unexpected rise could pile pressure on Threadneedle Street to raise interest rates, even as economic growth falters, in a potential sign the UK could begin to mirror the stagflation of the 1970s - when growth stalled yet inflation continued to rise.
The Bank has said it could be forced to raise interest rates if Britain leaves the EU without a deal, saying the pound would plunge to drive up the cost of imports.The Bank has said it could be forced to raise interest rates if Britain leaves the EU without a deal, saying the pound would plunge to drive up the cost of imports.
However, most analysts believe it would need to cut rates to support jobs and growth.However, most analysts believe it would need to cut rates to support jobs and growth.
Sterling has come under intense selling pressure since the elevation of Boris Johnson to No 10, however the ONS said it was still too early to identify whether the weakness in the pound had started to push up the cost of living. It said the rising price of computer games, consoles and hotel prices rising more than they did last year had pushed up the rate of CPI from 2% in June.Sterling has come under intense selling pressure since the elevation of Boris Johnson to No 10, however the ONS said it was still too early to identify whether the weakness in the pound had started to push up the cost of living. It said the rising price of computer games, consoles and hotel prices rising more than they did last year had pushed up the rate of CPI from 2% in June.
In an ironic twist amid the public anger over British rail fares, the ONS said that little change in the price of an international train ticket over the past year prevented UK inflation from rising by a greater extent in June.In an ironic twist amid the public anger over British rail fares, the ONS said that little change in the price of an international train ticket over the past year prevented UK inflation from rising by a greater extent in June.
A reminder of how Germany’s economy has stumbled over the last year, including this morning’s disappointing drop in GDP.A reminder of how Germany’s economy has stumbled over the last year, including this morning’s disappointing drop in GDP.
#Germany's GDP contracted for the second time in the last four quarters. Q2 2019 GDP growth -0.1%, YoY growth -0.4%, slowest in 6 years pic.twitter.com/ZQfRfxvFpD#Germany's GDP contracted for the second time in the last four quarters. Q2 2019 GDP growth -0.1%, YoY growth -0.4%, slowest in 6 years pic.twitter.com/ZQfRfxvFpD
Sharp decline in manufacturing production -6% YoY in JuneThe car production has nose dived to 2009 levels pic.twitter.com/J5tTGFYUQmSharp decline in manufacturing production -6% YoY in JuneThe car production has nose dived to 2009 levels pic.twitter.com/J5tTGFYUQm
Brexit uncertainty may also be having a chilling impact on UK house prices - at least in the South of England.Brexit uncertainty may also be having a chilling impact on UK house prices - at least in the South of England.
Figures just released shows that the average property price fell in London, again, by 2.7% compared to a year ago. London house prices have now been falling over the year since March 2018.Figures just released shows that the average property price fell in London, again, by 2.7% compared to a year ago. London house prices have now been falling over the year since March 2018.
Prices also dropped by 0.6% in the South East, and by 0.2% in the South West.Prices also dropped by 0.6% in the South East, and by 0.2% in the South West.
But.... the picture is brighter elsewhere, with prices 3.2% higher in the East Midlands.But.... the picture is brighter elsewhere, with prices 3.2% higher in the East Midlands.
Overall prices rose by 0.9% per year, according to the Office for National Statistics.Overall prices rose by 0.9% per year, according to the Office for National Statistics.
Newsflash: the latest UK inflation data is out, showing that the cost of living keeps rising.Newsflash: the latest UK inflation data is out, showing that the cost of living keeps rising.
Britain’s consumer prices index rose by 2.1% in the year to July, up from 2%. That’s higher than expected -- economists thought CPI would drop to 1.9%.Britain’s consumer prices index rose by 2.1% in the year to July, up from 2%. That’s higher than expected -- economists thought CPI would drop to 1.9%.
However, real wages are still rising - we learned yesterday that basic pay grew by 3.9% over the last year.However, real wages are still rising - we learned yesterday that basic pay grew by 3.9% over the last year.
Another inflation measure, the Retail Prices Index, dropped to 2.8% in July from 2.9% in June.Another inflation measure, the Retail Prices Index, dropped to 2.8% in July from 2.9% in June.
That will be used to set UK rail ticket prices next year, meaning commuters face higher costs.That will be used to set UK rail ticket prices next year, meaning commuters face higher costs.
Fare rises will drive passengers from railway, unions warnFare rises will drive passengers from railway, unions warn
Katharina Utermöhl of Allianz has written about the growing risk of a German recession:Katharina Utermöhl of Allianz has written about the growing risk of a German recession:
After a good start to the year, the German economy has gone in reverse gear. In the second quarter, seasonally adjusted GDP shrank by 0.1%.After a good start to the year, the German economy has gone in reverse gear. In the second quarter, seasonally adjusted GDP shrank by 0.1%.
The weak foreign trade performance and declining construction investment proved sufficient to bring the German economy to its knees, despite continued positive consumption impulses. In view of the subdued outlook for world trade and the automotive industry and lingering elevated political uncertainty around trade, Italy and Brexit, at best mini-growth rates can be expected in the coming quarters.The weak foreign trade performance and declining construction investment proved sufficient to bring the German economy to its knees, despite continued positive consumption impulses. In view of the subdued outlook for world trade and the automotive industry and lingering elevated political uncertainty around trade, Italy and Brexit, at best mini-growth rates can be expected in the coming quarters.
It is particularly worrying that the weakness in industry is increasingly affecting domestic demand. After all, the German economy has so far been kept afloat primarily by private consumption and construction investment. Due to the very weak start to the third quarter, the recession risk is now at a high level.It is particularly worrying that the weakness in industry is increasingly affecting domestic demand. After all, the German economy has so far been kept afloat primarily by private consumption and construction investment. Due to the very weak start to the third quarter, the recession risk is now at a high level.
In better news for the eurozone, French joblessness has hit its lowest level since the financial crisis.In better news for the eurozone, French joblessness has hit its lowest level since the financial crisis.
Reuters has the details:Reuters has the details:
France’s unemployment rate fell to 8.5% in the second quarter from 8.7% in the first, according to data from the INSEE national statistics office, marking the lowest jobless rate in the euro zone’s second-biggest economy since the end of 2008.France’s unemployment rate fell to 8.5% in the second quarter from 8.7% in the first, according to data from the INSEE national statistics office, marking the lowest jobless rate in the euro zone’s second-biggest economy since the end of 2008.
Six economists polled by Reuters had forecast on average an unemployment rate of 8.7% for the second quarter.Six economists polled by Reuters had forecast on average an unemployment rate of 8.7% for the second quarter.
A steady improvement in the jobs market has offered French President Emmanuel Macron some relief in the face of months of street protests against government policies often criticised for favouring the wealthier members of society.A steady improvement in the jobs market has offered French President Emmanuel Macron some relief in the face of months of street protests against government policies often criticised for favouring the wealthier members of society.
Just in: The Netherlands economy outperformed Germany in the last quarter.Just in: The Netherlands economy outperformed Germany in the last quarter.
Dutch GDP increased by 0.5% in April-June, new government figures show, as it shook off the impact of the global slowdown and the US-China trade dispute.Dutch GDP increased by 0.5% in April-June, new government figures show, as it shook off the impact of the global slowdown and the US-China trade dispute.
Growth was supported by strong exports and consumer spending.Growth was supported by strong exports and consumer spending.
#Netherlands #GDP Growth Rate QoQ Flash at 0.5 https://t.co/8woVJeZF2Q pic.twitter.com/LF4vDVgjYy#Netherlands #GDP Growth Rate QoQ Flash at 0.5 https://t.co/8woVJeZF2Q pic.twitter.com/LF4vDVgjYy
Germany’s weak (non) growth report has dampened the mood on the Frankfurt stock exchange.Germany’s weak (non) growth report has dampened the mood on the Frankfurt stock exchange.
The DAX index of top German companies has fallen by 33 points, or 0.3%, in early trading to 11,713.The DAX index of top German companies has fallen by 33 points, or 0.3%, in early trading to 11,713.
Banks and industrial groups are among the top fallers, with Deutsche Bank losing 2.2%, tyremaker Continental down 1.7% and conglomerate ThyssenKrupp shedding 2.7%.Banks and industrial groups are among the top fallers, with Deutsche Bank losing 2.2%, tyremaker Continental down 1.7% and conglomerate ThyssenKrupp shedding 2.7%.
France’s stock market is also down 0.4%, while Britain’s FTSE 100 is flat this morning.France’s stock market is also down 0.4%, while Britain’s FTSE 100 is flat this morning.
Matthias Weber, economist at the University of St.Gallen, argues firmly that Germany should increase government spending to shore up growth -- especially as borrowing costs are so low.Matthias Weber, economist at the University of St.Gallen, argues firmly that Germany should increase government spending to shore up growth -- especially as borrowing costs are so low.
Given the current economic situation at the beginning of a recession, now would be the perfect time for Germany to support the economy by investing in its future.Given the current economic situation at the beginning of a recession, now would be the perfect time for Germany to support the economy by investing in its future.
Public investments in railways, roads, bridges, childcare centres, public schools, and renewable energy are much needed. Such investments could currently be made at an extremely low (even negative) interest rate and they would boost the slowing aggregate demand. It is unfortunate that some politicians cling to an economically unsound “concept” of zero debt and therefore miss out on these investment opportunities for Germany.Public investments in railways, roads, bridges, childcare centres, public schools, and renewable energy are much needed. Such investments could currently be made at an extremely low (even negative) interest rate and they would boost the slowing aggregate demand. It is unfortunate that some politicians cling to an economically unsound “concept” of zero debt and therefore miss out on these investment opportunities for Germany.
German government bonds prices have jumped to fresh record highs this morning, driving down the yield (or interest rate) on the debt to new record lows.German government bonds prices have jumped to fresh record highs this morning, driving down the yield (or interest rate) on the debt to new record lows.
The yield on Germany’s 10-year bund has now hit MINUS 0.62%, the lowest ever - meaning traders are paying MORE than the face value of the bonds.The yield on Germany’s 10-year bund has now hit MINUS 0.62%, the lowest ever - meaning traders are paying MORE than the face value of the bonds.
That means:That means:
Strategist Andreas Steno Larsen of Nordea Markets says Germany’s woes aren’t a surprise, given all the grim economic data recently:Strategist Andreas Steno Larsen of Nordea Markets says Germany’s woes aren’t a surprise, given all the grim economic data recently:
German Q2 growth at -0.1% q/q. It always surprises me how everyone gets surprised by recessions.It has been pretty clear for a while that Germany was on the brink of a recession. Just look at PMIs, Sentix Survey or the IFO. Next up, the Euro area as a whole? pic.twitter.com/sKxD8fgdjTGerman Q2 growth at -0.1% q/q. It always surprises me how everyone gets surprised by recessions.It has been pretty clear for a while that Germany was on the brink of a recession. Just look at PMIs, Sentix Survey or the IFO. Next up, the Euro area as a whole? pic.twitter.com/sKxD8fgdjT