UNEXPECTEDLY
There's that "U" word, and no one is more surprised than Olaf Scholz and his Green cultists.
The Germans had such hopes for eking out a teensy gain this quarter.
Output in Europe's biggest economy contracted by 0.1 percent compared with the previous three months, federal statistics office Destatis said, after expanding by 0.2 percent in the first quarter.
The second-quarter data surprised analysts surveyed by FactSet who had forecast a 0.1-percent increase.
The April-to-June period noticeably saw declining investment in equipment and construction, Destatis said.
"The German economy is stuck in crisis," said Klaus Wohlrabe, head of surveys at Ifo economic institute, citing persistent weakness in manufacturing and sluggish private consumption.
Inflation ticked up a notch, too. That's hardly helpful to a ruling coalition that just got their lederhosen handed to them because of food and especially energy prices spiraling out of control. Food prices still accelerating are going to cause some serious heartburn.
...But in further worrying news, German inflation edged up in July to 2.3 percent year-on-year from 2.2 percent a month earlier, according to Destatis, despite analyst expectations that it would remain unchanged.
Services sector inflation remained elevated, at 3.9 percent, while food price inflation accelerated slightly.
The European Central Bank will be closely watching the latest inflation and growth data as it weighs whether to cut rates again in September, after lowering borrowing costs for the first time since 2019 last month.
ING economist Carsten Brzeski said that Tuesday's data releases "have not made things any easier" for the ECB.
Sticky inflation in particular "will strengthen the doubts around another rate cut at the September meeting," he added.
And the economic outlook going forward ist sehr düster (gloomy, dark, dismal). Scholz's career is already on life support as it is.
..."Hardly any improvement is to be expected in the third quarter of 2024 either," he added.
Gosh. Why did so many people fall for the "radical right-wing" AfD (Alternative for Germany) party in the recent elections in spite of all the gas-lighting, hysterical vitriol the Brussels crowd and Scholz's coalition threw at them, and the legal warfare the German court system used to silence and punish members with?
Haven't a clue.
Scholz's government is rushing to blame China's weak economy as Germany is more export-oriented and heavily favors trade with the Chinese, but the fact of the matter is blaming Chinese weakness is not the easy excuse they want it to be. Additionally, German citizens will want to know why they were the only EU member whose economy contracted during the previous quarter while everyone else across the continent - even The FRENCH - seemed to be doing at least well, if not going outright gangbusters.
How does the EU collectively overperform economically while Germany underperforms?
Herr Scholz, we have a problem here.
...The comparison with other eurozone heavyweights was stark on Tuesday, with the French economy rising by a more-than-expected 0.3 percent in the second quarter.
The Spanish economy also beat forecasts, growing 0.8 percent on the back of higher exports and strong household spending.
Overall, output in the 20-nation eurozone expanded 0.3 percent over the second quarter, more than the 0.2 percent expected by analysts.
One analyst flat-out said they brought this Scheiße on themselves, and they are going to have to be willing to dig themselves out.
...“Of course, Germany’s export-orientated industry is more exposed to the weakness of the Chinese economy, for example, but many of the problems are homemade,” he added.
A shortage of skilled labourers, burdensome red tape, a costly green energy transition and years of under-investment in infrastructure are all adding to Germany’s woes.
There's also the impact of the flailing German auto industry to consider, which I've covered a number of times. The mandated transition to electric has been an unqualified cluster of epic proportions and has wreaked havoc with both production schedules and profits. Examples such as VW shutting down Audi EV plants and German carmakers forced into doing deals with Chinese EV manufacturers just to stay in the game keep the industry on its proverbial knees along with spiraling energy and material costs and labor issues.
...European carmakers are feeling the dragon's breath on their necks, even as they struggle to cope with the lack of anticipated demand they'd all spooled up for.
German carmakers struggled in China and suffered a drop in vehicle sales in the second quarter, but experienced diverging fortunes in the hotly contested electric-vehicle market.
...Competition in the electric-vehicle market has intensified and car makers have been cutting prices to try and gain market share, particularly as production of new cheaper models from Chinese manufacturers have hit the market and begun to gain traction in Europe.
Even as consumer demand for EVs falls worldwide and European automakers struggle to find the right product mix, Chinese EV manufacturers are eating German lunches in their own backyard, all while rushing to build their own factories IN Europe to avoid the looming EU tariffs.
...Their 72 percent sequential jump from May was twice the gain in overall European EV registrations for June. Chinese-made imports from Western manufacturers including Volvo Car, BMW Group and Tesla are also subject to the new duties.
...While state-owned SAIC was responsible for the biggest jump in Chinese-branded imports, some 40 percent of the MG4s registered in June were self-registrations by dealers — “not a very healthy growth,” said Gabriel Juhas, head of product at Dataforce.
The Chinese can afford to give away the farm to sell a car. The Germans, not so much.
And now poor Olaf won't be spending his summer humming Edelweiss with a frosty beer mug in one hand and a pretzel in the other.
Olaf Scholz didn’t want to think about politics during his summer holiday. He was “looking forward to quiet times, to being able to exercise, enjoy nature, read books and just spend a lot of time with my wife,” he told the German media.
If the German chancellor did risk a peek at the news on Tuesday, the calm of his three-week break may have shattered. Germany’s economy shrank unexpectedly in the second quarter of the year, leaving the country teetering on the brink of recession and his party struggling to regain trust.
...This is bad news for Europe’s largest economy and for Olaf Scholz. In the chancellor’s traditional summer press conference, he had announced that he would seek re-election next year despite dire approval ratings and even though surveys suggest only a third of his fellow Social Democrats (SPD) want him to.
Scholz’s party is heading for a drubbing in regional elections this September in Saxony, Thuringia, and Brandenburg. Polls suggest that in these three states of the former East Germany both the hard Right AfD and the Left populist Bündnis Sahra Wagenknecht (BSW) are likely to perform extremely well. In all three states the AfD could be the largest party and the BSW looks set to get more than twice the vote share of the ruling SPD in both Saxony and Thuringia.
Scholz hopes to “turn things around” before the federal elections in September 2025, showing the public that his government had “made the right decisions” for Germany. But this will be very difficult with economic figures that can’t be explained away with a nod to the international situation.
Heckuva campaign poster for a party "struggling to regain trust." They've had the helm for years.
"Looking ahead, the German economy will continue to hover between hope and despair."
— DW Politics (@dw_politics) July 30, 2024
New data shows that Germany's economic output fell by 0.1% compared to the first quarter, dampening prospects of a recovery in Europe's largest economy.
https://t.co/YYN1uLq242
Good luck with that in September. Those pesky elections ruin everything.
Strangely enough, so does Woke and Green.
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