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More gloomy economic news from Germany

More gloomy economic news from Germany
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German exports plunged in August by their largest amount since the height of the financial crisis.

They were down by 5.8 percent, though the Federal Statistics Office said that was partly due to summer holidays being taken later than usual in some German states, which also hit imports.

It is the latest sign that the economy is faltering amid broader eurozone weakness and crises abroad which have battered confidence and delayed German firms’ investment plans.

Earlier in the week we learned of steep drops in industrial orders and output data.

At the same time a group of leading economic institutes slashed their growth forecasts.

They are now expecting Europe’s largest economy to expand by 1.3 percent this year and 1.2 percent next, down from 1.9 and 2.0 percent previously.

The institutes also urged the government to increase growth stimulus through capital spending and to encourage private investment, stressing there was sufficient “financial room for manoeuvre”.

Chancellor Angela Merkel’s government has faced pressure from within Germany as well as from ailing European states such as France and Italy to ratchet up public investment in infrastructure instead of prioritising deficit reduction.

The institutes indicated that the government could do more: “The most important job for economic policy in this field is to boost growth and create the right conditions for investment. There is some room for manoeuvre for constructive fiscal policy,” they said, pointing to taxes and public spending.

Germany had a strong start to the year but shrank by 0.2 percent in the second quarter. Evidence is mounting that it barely grew in the third quarter and some economists are forecasting another contraction in that period, which would amount to a technical recession.

with Reuters