Business World

Tuesday 23 July 2019

Germany feels pinch as exports to China fall

Economy static in final quarter

Germany stalling: People sit at a cafe terrace as skyscrapers stand beyond on the city skyline in Frankfurt
Germany stalling: People sit at a cafe terrace as skyscrapers stand beyond on the city skyline in Frankfurt

David Chance

GERMANY'S economy, the industrial powerhouse of the Eurozone, did not grow at all in the final quarter of last year after shrinking in the prior quarter.

German official statistics agency Destatis said that the country was hit by weak household spending and exports as the global economy cooled and demand for its cars and machines, the staple of the world's most successful exporter, fell in China.

"The German economy barely escaped recession in 2018," said Timo Wollmershaeuser, chief economist at the Ifo Institute for Economic Research in Munich, Germany's most influential economic think-tank.

Germany's vaunted manufacturing sector, home to the likes of Volkswagen and Siemens, ended the year in recession, with a variety of factors weighing on output from emissions tests for the car industry and low water levels on the Rhine which reduced shipments.

"The overriding point is that there is a genuine lack of momentum in German manufacturing, and things are unlikely to improve unless global demand - especially Chinese demand - strengthens," said Shweta Singh at economic consultancy TS Lombard.

"The transitory factors holding back growth will fade, but those expecting a swift, healthy rebound in Germany will be disappointed," she said.

There was no separate data for Ireland, although a slowing in global trade is a major risk to the economy here where US multinationals dominate what has become one of the world's most export-oriented economies.

Chemical and pharmaceuticals and medical devices account for around 80pc of our exports, and although exports to China from here are far lower than those to the United States and the European Union, the country is part of the complex global supply chains that criss-cross the world, so it is vulnerable to any downturn.

A new economic study by economists at the Central Bank of Ireland highlighted the increased risk of a recession in the eurozone at a time when the European Central Bank has stopped buying new government bonds and still insists that it is on the path to raising interest rates this year.

Washington and Beijing are currently holding intense talks so as to avert a doubling of tariffs on around half of all Chinese exports to the United States.

US President Donald Trump has threatened the new tariffs from March 1.

In addition to the threat to global supply chains from the US-China spat which could embroil Irish exports, Washington is also due to decide whether it will impose tariffs on car imports, specifically from the European Union.

That measure that would trigger an immediate response from Brussels.

Irish Independent

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