Advertisements

German Growth Rate For 2013 Drops Massively

Comments Off on German Growth Rate For 2013 Drops Massively

 

The Bundesbank massively cut its growth forecasts for 2013 for the German economy from previous estimate of 1.6% down to 0.4%. Such a huge drop in growth forecast shows even the mighty German economy which has benefited from a weak euro is now feeling the pressure. Its the last thing Merkel needs as she faces an election next year with a weakened economy and a growing bill for bailing out the rest of Europe. Couple that with the TARGET2 imbalance and a strong possibility of Italy or Spain needing a bailout, she could be facing an angry electorate.

germanThe German economy could slam into reverse this winter as the crisis in the eurozone intensifies, the country’s central bank warned yesterday.

The Bundesbank slashed its growth forecasts in an abrupt reversal for Europe’s powerhouse economy. It now expects Germany to grow by 0.7 per cent this year and just 0.4 per cent next year.

It was previously expecting growth of 1 per cent in 2012 and 1.6 per cent in 2013.

But the Bundesbank added that there was a risk of recession – defined as two quarters of contraction in a row – this winter. ‘There are indications that economic activity may fall in the final quarter of 2012 and the first quarter of 2013,’ it said. Germany has been the key driver of an otherwise moribund eurozone.

Experts warned the country’s slump is ‘a big reality check’ and casts doubt over the future of the single currency. Any setback in the eurozone, Britain’s major trading partner, raises the risk of a new recession here. The Bundesbank blamed the crisis crippling the eurozone for the downturn amid signs that German patience with struggling economies such as Greece and Spain is wearing thin. ‘Germany cannot prosper alone,’ it said. ‘It has a particular interest in the welfare of its partners.’

The gloomy analysis came a day after the European Central Bank warned that the 17-nation eurozone will remain mired in recession until late next year. ECB president Mario Draghi said a ‘gradual recovery’ will not start until ‘later in 2013’ as the region lurches from one crisis to the next. The eurozone sank back into recession over the summer as the malaise in peripheral states spread to Germany and France.

The German government put on a brave face in response to the Bundesbank forecast. A spokesman for Chancellor Angela Merkel said: ‘The government is cautiously optimistic that we’ll keep growing.’

Source: Daily Mail

 

 

Advertisements

Japan Back In Recession

Comments Off on Japan Back In Recession

Japan has sunk back into recession and the solution according to opposition leader Abe is to call for even more stimulus through unlimited monetary easing according to Bloomberg. That is not a good sign when its open-ended, as it demonstrates a lack of a clear plan as to when the economy will recover. A strong yen, weak demand from Europe and a spat with China have all combined to weaken Japan’s economy. The auto industry is factoring in a sharp contraction in sales next year  driven by a dramatic decrease in demand from China.

Japan’s economy sank into recession in the second and third quarters, fueling opposition leader Shinzo Abe’s calls for more stimulus and highlighting the risk that weak growth will derail a planned sales-tax rise.

Gross domestic product shrank an annualized 3.5 percent in the three months through September, the Cabinet Office’s second estimate showed in Tokyo today, matching a preliminary reading. The government revised the previous quarter to a 0.1 percent contraction, meeting the textbook definition of a recession.

Abe, whose Liberal Democratic Party is leading in polls to win elections on Dec. 16, has called for more fiscal stimulus and “unlimited” monetary easing, and has said that economic conditions next year will determine whether the sales tax rise goes ahead. Banks including Citigroup Inc. forecast another contraction this quarter as exports fall and domestic demand stays weak.

“It’s likely that Japan’s economy hit bottom in the last quarter,” said Shuichi Obata, senior economist at Nomura Securities in Tokyo. “The new government will aim to have solid growth by the middle of next year as they have to decide whether to raise the sales tax or not.”

……..

Japanese manufacturers such as Sharp Corp. (6753) and Honda Motor Co. (7267) are grappling with weaker earnings after a strong yen, slow European demand and anti-Japanese demonstrations in China hurt exports.

Nissan Motor Co. (7201) and Honda cut their profit forecasts for the year ending March 2013 by about 20 percent, citing a slump in China sales.

The sales tax bill raises the levy to 8 percent in April 2014 and to 10 percent in 2015, and a clause allows for implementation to be canceled based on an assessment of economic conditions. The last sales tax increase in 1997 contributed to pushing the economy into a 20-month recession, costing then- premier Ryutaro Hashimoto his job.

From the previous quarter, the economy shrank 0.9 percent in the July-September period, unchanged from the government’s initial forecast, today’s report showed.

Source: Bloomberg

 

 

%d bloggers like this: