Why Germany is expected to hit an economic downturn

As global trade tensions continue to affect the world, Germany is in the midst of trying times economically. The country, for example, just got slapped with data from its national statistics office that paint a bleak economic picture going forward, according to the BBC and other media outlets.

“Data from the German statistics office on Wednesday showed the economy shrank by 0.1% between April and June,” according to the article. Notably, this information is nothing new for the country. In fact, Germany “narrowly avoided” a recession in 2018, according to the piece. However, there’s one key difference to this most recent data: “There are predictions the economy will continue to contract for another three-month period,” the BBC reported.

Marcel Fratzscher, the president of the research institute DIW Berlin, told the BBC in an interview why this could finally be the reason that Germany enters a recession. "Most likely we will see another quarter of negative growth, and that's by definition a technical recession," he said in the interview.

More specifically, the German economy is expected to contract 0.1% between July and September. "It's very mild, but also at the same time, not a very strong performance," he added in the BBC interview.

And with Germany headed for more economic woes, it’s likely that other Eurozone countries will be dramatically affected, especially since it’s typically such an economic powerhouse, according to the Associated Press. “Germany, Europe’s industrial powerhouse and biggest economy, with companies like Volkswagen, Siemens and BASF, may be entering a recession,” the news publication explained, which is a “development that could have repercussions for the rest of the eurozone and the United States.”

The article goes on to point out the various industries and company that may very well be negatively impacted due to the country’s overarching economic issues. For example, along with the auto industry, which includes Volkswagen, Daimler and BMW, other major corporations such as Bayer, Merck and Linde could be drastically affected. This, in turn, could lead to layoffs and other bad news for workers in the area.

Carsten Brzeski, the chief economist for ING bank in Germany, told the Associated Press that “the bigger picture is that the trade conflicts and uncertainty are finally starting to hurt one of the most open economies.” He added, “If this stagnation/recession continues and leaves more lasting marks on the domestic economy, the rest of the world will also notice.”

Therefore, it appears that Germany’s issues could be widespread across multiple industries and will impact many of its largest companies, according to the various media reports on its latest poor economic data. This will likely have a far-reaching effect on other European countries as a result.