The European train is slowing down as one of its main drivers, the German economy, is experiencing a slowdown. At the same time, job creation across the EU is declining. EURACTIV’s partner Euroefe reports.
On 14 August, Germany’s Federal Statistical Office (Destatis) reported that the country’s gross domestic product (GDP) contracted by 0.1% in the second quarter compared to the first.
For two non-consecutive quarters in a year, Europe’s largest economy has been declining due to trade wars and problems in the automotive sector.
“Foreign trade has slowed the pace of economic growth, as exports declined more than imports compared to the previous quarter,” the statistical office explained in its statement. However, it also noted that domestic demand, government spending and construction had recovered between April and June of this year.
The difficulties of the second quarter came after a 0.4% increase in the first quarter. Germany had already approached the technical recession in the second half of 2018, with a contraction of 0.2% in the third quarter followed by a stable year-end.
Compared to the same quarter last year, the annual growth rate slowed to 0.4% GDP, according to Destatis.
The poor relations and the trade war between the US and China are undermining Germany’s usually strong export and manufacturing sectors.
In June, industrial production fell by 5.2% compared to the previous year, the most significant drop in ten years. Exports fell by 8%, the most significant decline in three years.
Uncertainties associated with Brexit, which is dangerously approaching a no-deal scenario following Boris Johnson’s appointment as prime minister, are also contributing to the economic slump.
The eurozone’s economic slowdown, as well as Italy’s political problems, are also significant factors.
The automotive industry, Germany’s primary employer and exporter, is also experiencing turbulences. In addition to the problems associated with the new European emission standards, there has been a decline in demand.
Sales of Mercedez-Benz, BMW and Audi, have fallen since the start of the year compared to the same period in 2018.
Sebastian Dullien, director of the Macroeconomic Policy Institute (IMK), warned that the risk of recession “is high, once again.” He also estimated that “the prospects for the coming months are more dramatic than the small decline in GDP.”
On television, the President of the German Institute for Economic Research, Marcel Fratzscher, spoke of the “enormous” political risks that are disrupting growth but confirmed that the country was not facing a “deep recession”.
Eurozone sees slight GDP increase
The eurozone’s GDP grew b 0.2% in this year’s second quarter, but less than the 0.4% recorded between January and March. According to Eurostat, this is because of the German economy’s decline and the Italian economy’s stagnation.
In the EU as a whole, the GDP grew by 0.2%, which is also lower than the 0.5% rate of the previous quarter, according to data published by the European statistics office, which confirms its prior estimates.
The eurozone’s slowdown in the second quarter was due to weak international trade – with the US and China intensifying their trade wars – affecting the external and manufacturing sectors, and global uncertainties, particularly Brexit, according to the European Central Bank.
Less job creation
Eurostat has also published employment data for this year’s second quarter, which show that there is continued but slowed job creation.
Between March and June, the number of employees increased by 0.2% in both single-currency countries and all 28 EU member states, slowing down from the 0.4% increase recorded in the first quarter in both zones.