Germany – a slowdown
For the last five years it has been the auto sector that was responsible for almost all of the growth in German IP. Naturally, the Asia/EM slowdown had already started to impact German car exporters quite severely and there were also some signs of a slowdown in shipments to the rest of the Euro Area over the summer even before the VAG debacle. Therefore, it seems that the risks to IP are firmly to the downside. Furthermore, now that momentum in the terms of trade has been lost, it’s likely that household real income growth will ebb away. Indeed, retail spending trends have plateaued. Hence, with consumption flat and fiscal policy tightening, we suspect that we have already witnessed the peak in German growth this year and so the risks to the economy lie unevenly to the downside.
Blog by Sophie