Figures released on Thursday underscored the degree to which Germany’s resilience to the economic crisis in Europe is waning – and how it can no longer be relied on to pull the eurozone out of its deep slump.
German economic growth slowed to just 0.3 percent between April and June as exports weakened.
Rob Dobson, senior economist at survey compilers Markit said: “Germany is not going to be one of those countries which is exceptionally bad, but it is a very open international trader and a big exporter. What we’re seeing in these numbers from manufacturing and very weak export orders numbers, so if global economic conditions continue to deteriorate, continue to slow, that could hit Germany going ahead.”
The latest survey of companies carried out by Markit showed orders from abroad for German goods – a mainstay of its economic strength – fell at the fastest rate in more than three years.
German exports did rise 2.5 percent in the second quarter, but the euro crisis it hitting its biggest market. Roughly 40 percent of German exports go to its partners in the currency bloc and 60 percent to those in the broader European Union.
German companies suffered a fourth month of declining activity, suggesting the country’s economy could shrink in the third quarter.
The country’s export markets beyond Europe are showing signs of a slowdown, putting pressure on policymakers to find a way to stabilise Europe’s economy and keep nervous German consumers willing to spend.
Many economists are pinning their hopes on consumption rather than trade to power growth in the rest of the year, given low unemployment and interest rates, as well as wage rises.
Private consumption and government spending rose 0.4 percent and 0.2 percent respectively in the second quarter.
Even here, there are elements of doubt, with the poor economic backdrop leading to layoffs, which makes it less likely people will spend.