Shock Contraction In German Growth Fuels Eurozone Fears

[Sancho Panza]

Telegraph 14/8/14

'The German economy suffered a surprise contraction in the second quarter, its first in more than a year, as foreign trade and investment, particularly in the construction sector, weighed on growth in Europe's largest economy.

The data, combined with weakness in other large countries like Italy and France which on Thursday halved is growth forecast for this year, is likely to raise new doubts about the recovery in the eurozone, which is struggling to emerge from the deep financial crisis that nearly tore it apart.

Germany's Federal Statistics Office said the economy shrank by 0.2pc between April and June. It had been forecast to stagnate, according to a Reuters poll.

It was a marked slowdown from the January-March period, when the economy grew strongly, in part due to mild winter weather. In a further blow, the Statistics Office revised down the first quarter growth figure to 0.7 percent, from a previously reported expansion of 0.8 percent.

Unadjusted data showed the economy grew by 0.8pc on the year in the second quarter, missing the consensus forecast in a Reuters poll for it to expand by 1.5pc.

On Wednesday, figures shows annual German inflation fell to 0.8pc in July - its lowest level since February 2010 - amid weak data from across the eurozone has analysts worried that the region’s recovery has been derailed.'

[TheCountOfNowhere]

My only eurozone fear is that they will start printing money instead of locking up the banksters for their frauds.

[Patfig]

My only eurozone fear is that they will start printing money instead of locking up the banksters for their frauds.

printy printy

[shindigger]

Shiny to the moon Rodney!

[Eddie_George]

printy printy

Goes without saying. They're already doing by the back door anyway.

[byron78]

So the German economy is weak because it's still growing faster than our own economy we've been told is all powerful and recovered again?

Lovely.

[dances with sheeple]

Good stuff, the fairy tale of "recovery" is being challenged.

[Venger]

A certain newspaper, with an online version that is paywalled, was yesterday looking beyond industrial numbers latest industrial production numbers (including the -0.8% Spain 'in deflation' with their sharpest drop in shop prices for 5 years according to Telegraph, retailers having to discount to attract buyers), and arguing data was being misinterpreted.

Arguing much of German growth of recent times has been from high capital inflows, that has also manifesting itself in rising German house prices.

Welcoming Greece back to growth, and Spain powering back to annualised 2.4% growth, and Portugal the same 2.4%,.

With no shock about UK real wages falling against inflation, as that's been going on for years. Now with declining high-productivity wage growth positions, and Gov's 'recovery' drive, leading to more jobs on lower wages.

[1929crash]

I'm sure that sanctions on Russia, and Moscow's retaliation on EU food imports, is not oing to help.

[crashmonitor]

I'm sure that sanctions on Russia, and Moscow's retaliation on EU food imports, is not oing to help.

The trouble will really come if the gas pipelines get shut off to the Eurozone. I guess we will be fairly sheltered for at least a year with Norwegian contracts they must honour. Russia certainly have the POWER to sink Euro growth

[campervanman]

The EZ have got it all wrong. They should have gone with the high house price, low wage, exponentially growing consumer debt recovery and then they could preach to the rest of the world how to grow your economy.

[The Masked Tulip]

So when does the EU QE?

[zugzwang]

I

The EZ have got it all wrong. They should have gone with the high house price, low wage, exponentially growing consumer debt recovery and then they could preach to the rest of the world how to grow your economy.

UK 'growth' figures should be similarly impacted in the second half of 2014. The credit impulse from FLS/HtB will be exhausted by the end of the year, if it hasn't been already, and even the London hyperbubble appears now to have burst decisively.

[1929crash]

The trouble will really come if the gas pipelines get shut off to the Eurozone. I guess we will be fairly sheltered for at least a year with Norwegian contracts they must honour. Russia certainly have the POWER to sink Euro growth

I am not so sure we can be totally insulated from a European gas cut-off.

There will be a huge price spike - would this lead to force majeure being declared as a reason for the voiding of GB contracts with Norway?

And a drop in commercial and industrial/agricultural output in the rest of the EU will have severe consequences for us, I would have thought, given the interdependency of the Uk economy with the rest of Europe.

And if it's a really cold winter, would the Uk keep everything going as per normal while French and German citizens froze to death?

Edited August 15, 2014 by 1929crash

[pizzaman]

did someone once mention green shoots?

hohoho

[crashmonitor]

Meanwhile the Spectator reckoned last year we could overtake Germany on drawing games from here on in since they are likely to start losing matches 5-0.

Doesn't always work though, buying league position on debt....look at Leeds United.

http://www.spectator.co.uk/features/9039871/why-britains-economy-will-overtake-germanys/

[crashmonitor]

I've been trying to find a growth league table for Q2 2010-Q2 2014. I guess we are pretty much mid table in the EC but gaining fast now most of our opponents are off form. Since this was the measure which Ed Balls wanted to judge the Tories it's a shame I can't find anything on google.

IMO growth gained on a 7% structural deficit is nothing to be proud of against a Eurozone that has more rigid rules on deficits....but that was Balls' test.

Edited August 15, 2014 by crashmonitor

[billybong]

I've been trying to find a growth league table for Q2 2010-Q2 2014. I guess we are pretty much mid table in the EC but gaining fast now most of our opponents are off form. Since this was the measure which Ed Balls wanted to judge the Tories it's a shame I can't find anything on google.

IMO growth gained on a 7% structural deficit is nothing to be proud of against a Eurozone that has more rigid rules on deficits....but that was Balls' test.

http://

stats.oecd.org/index.aspx?queryid=9185

That site lists a lot of data including gdp for a lot of different countries including the eu as a group - going back to 2007 upto 2013. Unfortunately it doesn't seem to have it in league format. How accurate it is is anybody's guess.

Edited August 15, 2014 by billybong

[Ash4781]

The 10yr bund reported to have dropped below 1%.

[Trampa501]

German tourist numbers to Spain in Q2 up 10% on the previous year. Anyone with the car sales figures for Germany ? Hang on - they're up as well. ???

http://uk.reuters.com/article/2014/08/04/uk-germany-autos-sales-idUKKBN0G417020140804

(Reuters) - Car sales in Germany bounced back in July, posting the second-highest monthly gain this year and suggesting a further pick-up in second-half demand in Europe's biggest auto market.

[Venger]

Radio in the kitchen as I got my breakfast had correspondent interviewing people around Germany. One guy who ran a food store saying you can quite easily get a job in Germany but it's not going to be very well paid. Another guy saying Germany reliant on other European countries to spend for their growth.

Switching to an English economist or posh-man of some sort, he was blaming lack of velocity of money/credit in the economy. Blaming stronger regulation on the banks making them not able to lend as much, and the higher capital reserves banks being made to hold.

That it's preventing borrowing. Saying Europe needs to get QE going to get money/debt for the people to spend. Doesn't consider that there is less demand to borrow, against overinflated assets and business assets in hands of a core of VI who won't sell except for very high prices. Apart from high demand to borrow from usual victims who will pay what it's worth and are entitled, some 40+ year old non-owner renter-savers on the forum carrying about 10 of them on their shoulders after 15 years of excuses.

Meanwhile in UK, Charles & Ann refuse an offer of £800,000 on their £850,000 as they won't sell it for less than it's worth, and "Don't need to sell." London house owners sneering at prospect of a tax, millions in equity bought, rather than racing to downsize. Property Tribes guy being chased for £300,000 debt he had a spending 10 year frenzy of spending fun, refusing to repay, blaming banks, blaming tenants. Perhaps fewer excuses on hpc these days, apart from those who claim saving is idiotic and life is about spending everything you get.

[oracle]

Radio in the kitchen as I got my breakfast had correspondent interviewing people around Germany. One guy who ran a food store saying you can quite easily get a job in Germany but it's not going to be very well paid. Another guy saying Germany reliant on other European countries to spend for their growth.

bit of a double edged sword then isn't it, if they need to force people to take easy credit to get growth.

it's not realy sustainable.

I think even henry ford figured out that you need to pay people well enough to buy your product, otherwise you have no market for your goods.

easy credit is not pay.it's an IOU.

don't ask what the REAL penalty clause is planned to be for non-payment,you won't like the answer at all.(lets just say you should listen to the lyrics of "olivers army" for a clue.)

better still, get yourselved clued up, and be patriotic for once, support your local farmers and producers, if you can't do that, then give preferential treatment to countries that are "friendly"

[davidg]

. Another guy saying Germany reliant on other European countries to spend for their growth.

That's interesting. Hollande's plan for France was not to make any meaningful structural reforms but to rely on the German "motor" to pull France out of recession. Looks like the parasite has killed the host^ (as The Ecomomist has warned on more than one occasion).

^ and I note that you could equally describe Germany as a parasite.

Edited August 16, 2014 by davidg

[Executive Sadman]

That's interesting. Hollande's plan for France was not to make any meaningful structural reforms but to rely on the German "motor" to pull France out of recession. Looks like the parasite has killed the host^ (as The Ecomomist has warned on more than one occasion).

^ and I note that you could equally describe Germany as a parasite.

The French should operate a closed economy. They seem utterly incapable, politically, of accepting they need to work longer and harder if they are to compete in the global marketplace. Isolating themselves from the outside world is the only option.

[silver surfer]

The French should operate a closed economy. They seem utterly incapable, politically, of accepting they need to work longer and harder if they are to compete in the global marketplace. Isolating themselves from the outside world is the only option.

They could start a club or affiliation of like minded countries and focus on trading between themselves...