A collapse in exports pushed Europe’s largest economy to the brink of recession in the second quarter of this year.
In a sign that an increasingly hostile trade dispute between the US and China is at least partially to blame for Germany’s deepening manufacturing malaise, shipments abroad declined 1.3 percent, the most in more than six years. That led to a contraction in total economic output — the second over the past year.
Weaker global trade and upheaval in the auto industry are dragging Germany’s economy deeper into trouble, with repercussions for the broader eurozone economy.
Plunging business confidence and warnings from some of the country’s biggest companies are adding to concerns about the outlook and piling pressure on German Chancellor Angela Merkel to provide fiscal stimulus.
Collateral damage from a US-inflicted trade conflict could soon intensify. US President Donald Trump threatened to impose tariffs on European car imports earlier this month and labeled the EU “worse than China.”
In an attempt to defuse tensions, Merkel on Monday said that she wants the bloc to start trade talks with the US.
The 0.1 percent contraction in the second quarter matched the initial estimate earlier this month. Net trade subtracted 0.5 percentage points from total output, more than offsetting gains in private as well as government consumption. Construction shrank after strong growth at the start of the year and investment contracted slightly.
German companies, including Henkel AG and Continental AG have blamed geopolitical uncertainty and trade for a weaker outlook.
Many firms have highlighted difficulties in predicting earnings prospects.
Adding to the challenge, weakness in manufacturing is starting to spread into other industries, said Clemens Fuest, president of the country’s Ifo institute.
The think tank’s closely watched business confidence indicator this month slid to the weakest level in almost seven years.
The economy’s disappointing run has amplified calls for fiscal stimulus. While the German Ministry of Finance is studying options — to be deployed in case the crisis worsens — so far, the government has defended its policy of a balanced budget.
With private spending still relatively robust thanks to a solid labor market, the Bundesbank has also cautioned against any knee-jerk reactions to a downturn driven by external demand and following years of strong growth.
Jens Weidmann, the institution’s president, said over the weekend that “there’s no reason to panic.”
He also sought to lower expectations for a big package of measures from the European Central Bank, arguing against a new round of quantitative easing.
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