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Economist Warns That Investors Need To Be Wary As Germany’s ‘Powerhouse’ Economy Is Cracking


03/09/2017


Economist Warns That Investors Need To Be Wary As Germany’s ‘Powerhouse’ Economy Is Cracking
One of the more noted economist is of the opinion that the health of the world's fourth largest economy is not as rosy as most people think even though Germany is often described as an economy that is considered to be the "powerhouse" of Europe and European economy.
 
"The crack in Germany's economy has become most evident in consumer spending. Retail sales volumes have slowed consistently since growth rates peaked in mid-2015. They have crashed in the last six monthly reports," Carl Weinberg, chief economist at High Frequency Economics, said in a note earlier this week.
 
Despite an uptick in growth at the end of last year, Germany's economy has been facing problems for at least the past six months, shows hard data. And even while the economy is facing problems and a potential slow down, economists are yet to find otu and identify the reasons behind what is witnessed as a dramatic slowdown in income over the same period.
 
"As domestic demand is imploding, so is foreign demand," Weinberg added. "Exports are flat year-on-year. This is not to say that net exports are not rising. However, the flat gross exports mean industrial output to make goods for export is not growing."
 
"Without growth of either exports or domestic consumer spending, industrial production has stalled," Weinberg said.
 
Noting the biggest monthly fall since 2009, there has been a 7.4 percent drop on the month in January in the industrial new orders in Germany as is shown by data that was released on Tuesday. A close examination of the data showed that here had been a drop of 4.9 percent in new foreign orders from German and is compounded by a contraction of  10.5 percent in domestic demand fr goods, according to an analysis b the international news agency Reuters.
 
However, some degree of relief was provided to the investors and analysts on Wednesday when the data for industrial production was released. The data showed that contracting by as much as 2.4 percent in December, there was a rise in industrial production by 2.8 percent on the month.
 
Carsten Brzeski, chief economist at ING, said in an email on Wednesday that "the increase in industrial production shows that the shocking drop in December was mainly driven by the Christmas season and the cold winter weather. At the same time, however, the fact that on the year industrial production has remained flat shows just how difficult it is for the industry to get out of stagnation."
 
Looking at the hard data, Weinberg concluded: "Germany's real economic indicators are faltering. A clear crack in the trajectory is evident. Those are the facts. Invest accordingly."
 
(Sourc:www.cnbc.com) 


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