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Euro Crisis: German Economy Nears Recession

Posted by: : Shayne HeffernanPosted on: October 18, 2013 Euro Crisis: German Economy Nears Recession

Euro Crisis: German Economy Nears Recession

Germany’s leading economic think tanks halved their 2013 growth forecast to 0.4 percent but said domestic demand may help drive a rebound next year.
The four institutes – the Ifo in Munich, DIW in Berlin, IW in Halle and RWI in Essen – predicted that Germany would generate 0.4 percent gross domestic product growth in 2013, compared with an earlier forecast of 0.8 percent, and said this would rise to 1.8 percent next year.

The 2013 growth figure marked a sharp revision of the think tanks’ spring estimate of 0.8 percent, and was prompted by more sluggish growth in emerging economies and mounting risks for a global economic recovery.

The four non-profit research groups, which include the Ifo institute in Munich, Berlin’s DIW, as well as the IW in Halle and Essen-based RWI, also said the German economy was on the threshold of a significant upswing carried by growing domestic demand.

Joblessness in the eurozone’s largest economy increased by a seasonally adjusted 25,000 to just under three million last month, pushing the unemployment rate to 6.9pc from 6.8pc in August. Economists had expected the number of people out of work to have fallen by 5,000.

The German Labour Office said the increase – to the highest level since May 2011 – was not down to economic swings but because measures to integrate jobless people into the workforce had less effect in September.

Unemployment in the single currency bloc has remained stubbornly high despite growing signs that the eurozone, which exited an 18 month recession in the second quarter of this year, has turned a corner.

“Overall eurozone unemployment rate remains worryingly high, and the chances seem slim that it will come down appreciably anytime soon,” said Howard Archer, economist at IHS Global Insight.

“Although the eurozone finally exited recession in the second quarter and likely saw slight growth in the third quarter, eurozone economic activity is likely to remain too limited in the near term at least to generate a significant number of jobs.”

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Shayne Heffernan Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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