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Germany’s economy: Should we be worried?

Germany’s economy: Should we be worried?

We learned that industrial production in February – excluding energy and construction – had fallen.

The previous day, new official data showed that manufacturing orders also declined in the same month.

At the start of the week, another survey of the same sector reported new orders and export sales “falling at rates not seen since the global financial crisis”.

We look at what’s gone wrong for the German industrial machine.

There’s no question that the German economy has hit a difficult patch. The widest measure of economic activity, gross domestic product (GDP), declined in the third quarter of last year by 0.2% and failed to grow in the following three months.

In terms of recession, as widely defined (two consecutive quarters of contraction), that is a very near miss indeed.

That said, the jobs market in Germany is still in pretty decent health. The unemployment rate is one of the lowest in the world at 3.1%.

Among the rich countries, only the Czech Republic, Iceland and Japan have lower figures. Germany’s unemployment rate has continued to decline during this period of weak GDP performance.

Another way of looking at it is the employment rate – the percentage of the working age population who do have jobs (or self-employment). That continued to grow in the last two quarters of 2018; by 0.2% in each period.