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MoneyGerman Economy Contracts as Trade Tensions Take Their Toll

10:16  14 august  2019
10:16  14 august  2019 Source:   msn.com

Recession fears in focus as German investor morale nosedives

Recession fears in focus as German investor morale nosedives Recession fears in focus as German investor morale nosedives

BERLIN— Germany slashed its economic growth forecast, invoking a shortage of skilled workers at home and global trade tensions aboard, a fresh sign that the European powerhouse is increasingly vulnerable to U.S.-China trade disputes. Germany ’s decadelong economic upswing is projected to

China’s economy is slowing faster than expected as Beijing this week heads into a crucial new round of negotiations with the U.S. over trade . For the past couple of months, senior Chinese officials have sought to play down the impact of U.S.-China trade tensions on the world’s second-largest economy

German Economy Contracts as Trade Tensions Take Their Toll © Getty

Germany’s economy shrank in the second quarter, piling pressure on Chancellor Angela Merkel to unleash fiscal stimulus as manufacturers reel from a U.S.-China trade war.

Output fell 0.1% from the previous three months, in line with forecasts, as exports slumped. The economy has contracted in two of the last four quarters. Merkel said Tuesday the country was heading into a “difficult phase” and even hinted her reluctance to respond is softening.

Bund futures pulled back slightly after the report. Investors reacted to annual figures that were better than expected due to revisions of economic performance in previous quarters.

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The German economy recorded zero growth in the fourth quarter, managing to just avoid a technical recession after reporting a contraction of 0.2% in the third quarter amid a slump in industrial output. Tensions between the US and China have acted as a handbrake on global goods trade , while growth

Weak exports are taking their toll on the German economy , the Bundesbank warned while slashing its growth forecasts, as fresh data highlighted how trade and geopolitical tensions are feeding into the global real economy . The central bank blamed “lacklustre exports” as it cut this year’s economic

German Economy Contracts as Trade Tensions Take Their Toll © Bloomberg Feel the Pain

The contraction in Europe’s largest economy is weighing heavily on a region struggling to sustain momentum. Growth slowed in most euro-area countries including France and Spain, Italy is teetering on the verge of recession, and profit warnings from some of the bloc’s biggest companies suggest little sign of a turnaround.

The latest downbeat economic numbers come a day after Dusseldorf-based Henkel AG issued a profit warning that summed up Germany’s woes. The industrial firm is facing pressure on two fronts, a slowdown in the auto industry and weaker demand in China, the same environment that’s crippled manufacturing across the country.

President Donald Trump on Tuesday delayed the imposition of some new tariffs on Beijing by three months to December, buoying markets. However, there was further bad news from China, the world’s second-largest economy, on Wednesday, with cooling retail sales and the slowest growth in industrial output since 2002.

E.on UK retail earnings plummet as price cap takes its toll

E.on UK retail earnings plummet as price cap takes its toll The German-owned supplier revealed a 78% plunge in second quarter underlying earnings at its UK retail supply arm to 12 million euro (£11 million).

Germany called out for stoking trade tensions with its 'fat' current account.

Germany stands to be among the hardest hit by the west's stance on Russia because it is Russia's biggest trading partner within the EU. The authors of the ZEW report said the decline in economic sentiment was the result of the geopolitical tensions that have begun to weigh on Germany 's growth.

In Germany, sentiment among executives and investors has plunged, suggesting a government forecast for growth of 0.5% this year, the weakest since 2013, might still be too optimistic.

Second-quarter output was damped by trade, with exports falling faster than imports. Private consumption and government spending were higher than in the previous three months. Investment rose despite a decline in construction.

What Bloomberg’s Economists Say

“The industrial sector tipped the economy into contraction in 2Q, and the risk is of further weakness in the second half of the year. If there’s any good news to take from this release, it’s that services must have continued to expand, indicating patches of resilience persist.”

--Jamie Rush.

The European Central Bank has already all but committed to hand out fresh stimulus to jump-start the economy and is forecast to cut interest rates as early as September. All that has helped push yields on German debt to record lows below zero. Earlier this month, the euro fell to the softest since mid-2017.

Euro zone July factory activity contracts at fastest rate in six years

Euro zone July factory activity contracts at fastest rate in six years Euro zone July factory activity contracts at fastest rate in six years

The head of the International Monetary Fund has been urging the United States and China to set aside their differences on trade . Christine Lagarde made the comments at the Paris Club annual meeting of debtor countries. Washington is accusing Beijing of backsliding on its commitments ahead of an

German business morale deteriorated slightly more than expected in October as rising trade tensions and the possibility of Britain leaving the European Union without a deal dampened confidence. “Growing global uncertainty is increasingly taking its toll on the German economy .”

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ECB President Mario Draghi has been among the chorus of international voices pleading with Germany to loosen the purse strings after running surpluses over the past half decade.

German industry has been mired in a slump as worsening trade woes and weaker global growth sap demand for machinery and cars. Industrial production suffered its biggest drop in a decade in June, and freight volumes at German airports saw the steepest decline since 2012.

Among the casualties is Siemens, which said earlier this month it would struggle to meet financial goals because of a deteriorating economy and heightened political uncertainty. Automotive supplier Rheinmetall also lowered its outlook, scrapping expectations for a “tangible” recovery in the coming months.

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