Germany’s economic health, one of the best bellwethers of the broader health of the global economy, is starting to look decidedly shaky
By Ambrose Evans Pritchard and cross-posted from The Daily Telegraph
The economic outlook in Germany is deteriorating with alarming speed and any mistake by policy-makers could push the country into a full-blown slump, a leading economic institute has warned.
“The danger of recession has increased markedly. It is a notably more critical picture than a month ago,” said the Macroeconomic Policy Institute (IMK) in Düsseldorf.
The IMK’s early warning indicator said the recession risk over the next three months has jumped suddenly to 32.4pc as trade tensions mount and liquidity ebbs away in the international financial system.
This is higher than in March 2008 when the pre-Lehman storm clouds were gathering and the country was already sliding into a slump, unbeknownst to Berlin at the time. It may be a false alarm but it clearly indicates that global growth is weaker than widely assumed just weeks ago.
“What we have seen lately is a typical late-cycle constellation, with uncertainty from the financial markets having a self-reinforcing spillover into the real economy. It is not yet clear whether such a downward spiral has already begun. Everything must be done to avoid intensifying the uncertainty,” it said.
Germany is heavily reliant on world trade and is therefore a bellwether for the broader health of the global economy. Its industrial sector lurched abruptly from boom to bust early in the last downturn and proved to be a leading indicator for the Great Recession…