Monday, February 23, 2009

Germany's outlook is not good

This is a terrible outlook for battered Germany. From Deutsche Welle:
In an interview with the Bild newspaper on Monday, Feb. 23, Deutsche Bank's Chief Economist Norbert Walter said Germany had to be prepared for a dramatic decline in economic output as the global downturn batters exports, decimates companies' profits and raises the specter of large-scale job losses.

Walter said a five-percent contraction is actually a fairly optimistic forecast, all things considered.

"The German economy will shrink by five percent in 2009 only if we have a real upswing in the summer," Walter told the paper. "It cannot be ruled out that this upswing will not come. Therefore, a worse result than this (five-percent contraction) can no longer be excluded," he said.


His comments came as Germany's main stock index, the DAX, slipped to 3,936.45 at closing time in Frankfurt on Monday, the first time in four years that it has closed lower than 4,000. Since the beginning of the year, the top 30 German shares have lost an average 16 percent of their value.
RW: This is truly humbling. The German economy posted a record 8.2% annualized decline (2.1% over the quarter) in the fourth quarter of 2008. Here is one trajectory that would tally up to -5.1% growth in 2009 as a whole:
  • Q1 2009: -5.5% annualized GDP growth rate
  • Q2 2009: -5.0%
  • Q3 2009: -5.0%
  • Q4 2009: -3.0%
With that growth trajectory, total output loss would be 7.6% since just Q1 2008.

Rebecca Wilder

1 comment:

  1. The numbers are bad, and probably will be revised downward, I'd guess. But I wonder if they have the will to take the inevitable downturn instead of going overboard with intervention. I know they have been stimulating pretty strongly, but they are in a better position to be able to afford it compared to many countries.

    I worry about what would happen to stability if they also had to bailout the weaker Euro nations to preserve the EU while their domestic economy suffers though.

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