Forecasting recession in Germany
Pro members, I have been writing a lot about Germany recently. About two years ago I predicted that austerity in places like Spain and elsewhere in the periphery would lead to recession not just in the periphery but Europe-wide. I stick to that prediction.
While Germany has done well of late, it was crushed by the downturn in 2008 and has an economy highly levered to external macro shocks since exports is a very large percentage of German GDP. German macro economists are forecasting recession for 2012. Recall that in Spetember people like Hans-Werner Sinn were saying Germany would never succumb to recession.
See here (graph in German):
This chart shows you that even for the whole of 2012, market economists in Germany see sub 1% growth, with HSBC seeing GDP shrinking.
New Forecasts of the bank’s economists for 2012
In the first quarter of 2012, this decline is likely to intensify further. Technically, Germany is thus already in the middle of a recession. An economy is by definition in a recession when economic output declines for two consecutive quarters.
However, economists expect that the decline in economic performance to be mild and for the economy to win back some kick over the course of the year. But more than 0.5 percent GDP growth is not in the cards for Germany this year according to the average forecast – a significant drop compared to last year.
The year 2011 was despite euro crisis all about economic growth. Almost all experts expect 3% GDP growth of three percent for 2011. It would be the second consecutive year with a plus three percent growth. Exact figures will be presented by the Federal Statistical Office on Wednesday.