### Summary
Germany's economic decline and China's struggles indicate major changes in global politics, challenging previous assumptions about Germany's dominance and China's rise as the world's largest economy.
### Facts
- German foreign minister Annalena Baerbock's diplomatic mission to enhance Germany's status in the Indo-Pacific region was derailed when her government's jet broke down, reflecting the country's declining state.
- China's official statistics bureau announced it will stop publishing regular youth unemployment figures after the record-high rate of 21.3% for Chinese 16 to 24-year-olds in June.
- Germany's economy is in decline, with three consecutive quarters of contraction. The International Monetary Fund predicts slower growth compared to the US, France, and the UK over the next five years.
- Angela Merkel's decisions, such as relying on Russian gas and neglecting defense spending, have contributed to Germany's decline.
- China's economy, once booming and beneficial for German exporters, is now facing challenges due to a stagnant market, aging population, contracting labor force, and a massive property market bubble.
- Foreign investment in China has significantly dropped, and China's position as the world's largest economy is in question.
### Analysis
- The decline of Germany and China disrupts previous assumptions about Germany's dominance and China's rise as a global superpower.
- Germany's decline opens up opportunities for closer bilateral relations with countries like France and Poland.
- The stability and prosperity of Germany remain important for Britain, but it also presents opportunities for the country.
- The United States retains its position as the top global power, which is beneficial for Britain as a key ally.
- Britain has its own challenges, such as high inflation, slow growth, high taxes, weak infrastructure, and the need to attract dynamic entrepreneurs and innovation.
U.S. economic growth may be accelerating in the second half of 2023, defying earlier recession forecasts and leading to a repricing of long-term inflation and interest rate assumptions.
The German economy stagnated in the second quarter of 2023, following a winter recession, with zero growth and a contraction in adjusted GDP, according to data from the statistics office.
The US economy is expected to slow in the coming months due to the Federal Reserve's efforts to combat inflation, which could lead to softer consumer spending and a decrease in stock market returns. Additionally, the resumption of student loan payments in October and the American consumer's credit card addiction pose further uncertainties for the economy. Meanwhile, Germany's economy is facing a contraction and a prolonged recession, which is a stark contrast to its past economic outperformance.
Germany, once hailed as Europe's economic powerhouse, is now facing structural problems and could be on the verge of decline, according to experts, with factors such as stagnant GDP, high inflation, an aging population, overdependence on exports, and underinvestment contributing to its current predicament.
Germany's business activity contracted sharply in August, causing concerns about the country's economy, and its plans to be carbon-neutral by 2045 pose a risk to its industry, according to Hans-Werner Sinn, president emeritus at the Ifo institute.
The German government has presented its 2024 budget, aiming to end years of government spending on managing crises such as COVID-19 and the war in Ukraine, with significant cuts across departments and limited social reforms, leading to controversy among coalition partners and opposition parties.
The European Commission has revised down its economic forecast, citing high prices for goods and services as a significant factor, leading to reduced growth projections for the European Union and the eurozone. Germany is expected to experience a downturn, while inflation is projected to exceed the European Central Bank's target. Weak consumption, credit provisions, and natural disasters are also contributing to the loss of momentum in the economy. However, the report highlights the strength of the EU labor market with a low unemployment rate.
Germany's deep economic troubles, including three consecutive quarters of negative growth, could have significant global implications, especially considering its role as the main driver of economic growth in the euro zone and its high exposure to the Chinese economy.
The labor markets are expected to pause on rate changes as the economy slows down, with growth in employment and capital expenditure decreasing and downside risks increasing, such as higher interest payments for the government and a potential United Auto Workers strike. However, there is hope for a rebound in 2024 with a potential pause in rate cuts and moderating inflation.
The German economy is expected to contract this quarter due to a recession in the industry and lackluster private consumption, leading to four consecutive quarters of negative or flat growth.
Germany is projected to be the most heavily impacted by the global economic slowdown due to higher interest rates and weaker global trade, according to the Organisation for Economic Co-operation and Development (OECD), with its economy likely to shrink this year alongside Argentina and experience a weaker 2024. The slowdown in China, inflationary pressures, and tightening monetary policy are among the factors affecting Germany's growth. The OECD also warned of persistent inflation pressures in various economies and called for central banks to maintain restrictive interest rates until underlying inflationary pressures subside.
Germany is facing an economic contraction due to challenges in the manufacturing sector, a disappointing China reopening boost, and higher energy costs, leading to a recession in Europe's largest economy. However, there are still some positive aspects, such as opportunities in Germany's small and mid-sized companies.
Germany, once known for its economic success, is now the worst-performing major developed economy, facing challenges such as high energy costs, the loss of cheap Russian natural gas, and a slowdown in key trade partner China, which have exposed cracks in the country's foundation and sparked debate about the way forward.
The euro zone economy is expected to contract this quarter and remain in recession as the impact of central banks' interest rate rises hampers growth, according to a survey by HCOB's flash euro zone Composite Purchasing Managers' Index (PMI), with Germany and France experiencing significant declines in business activity.
Germany, once the beating heart of the European economy, is facing structural challenges and a sense of decline, with forecasts predicting slow growth and contraction in the coming years due to its heavy reliance on manufacturing and struggle to transition to renewable energy and a service-based economy.
The UK economy is expected to slow in 2023 and 2024 due to high interest rates, continued uncertainty, and low productivity, with GDP growth predicted to drop to 0.4% this year and 0.3% in 2024, according to economists at KPMG and the OECD.
Inflation is expected to rebound in 2024 due to a mismatch between supply and demand created by the shift from services to goods during the pandemic, as well as a chronic shortage of workers, according to BlackRock strategists. This could lead to higher interest rates and a higher risk of recession.
Germany's economy, the largest in the EU, is expected to contract by 0.6% this year due to a slowdown in exports and years of under-investment in infrastructure and technology, posing long-term challenges for growth and requiring significant investment and reforms to address them.
Global economic growth is expected to slightly increase in 2024, but the United Nations warns of a precarious situation and significant economic headwinds that may lead to a slowdown in the U.S. and a potential recession in the eurozone. The UN also highlights the escalating debt distress among frontier economies and calls for more oversight and regulation of food companies in the global trade system.
German industrial output contracted for the fourth consecutive month in August, falling by 0.2%, indicating ongoing pressure on the sector and raising concerns of a recession, as analysts predict further decline in the coming months due to high interest rates and falling demand.
German industrial output contracted for the fourth consecutive month in August, raising fears of a recession in the sector, as falling demand and high interest rates continue to put pressure on the economy.
Germany is projected to experience a deeper recession than previously forecasted, with its economy expected to contract by 0.5% this year due to inflation, manufacturing decline, weakness in interest-rate-sensitive sectors, and slower trading-partner demand, according to the International Monetary Fund (IMF).
Germany's government expects the country's economy to shrink by 0.4% this year due to the energy price crisis and global economic weakness, contrasting the previous forecast of 0.4% growth.
Germany has revised its economic forecast for 2023, projecting a 0.4% decline in GDP due to the energy price crisis, inflation concerns, and weakening global economic partners, such as China.
Germany faces a contraction in economic growth, with the economy expected to shrink by 0.4 percent in 2023, making it the only major world economy to post negative growth figures this year, due to factors including the energy price crisis and weakening global economic partners.
Germany is projected to surpass Japan as the world's third-largest economy by 2023, driven by a decline in the yen and the euro, according to the International Monetary Fund (IMF).
High inflation is expected to persist in the global economy next year, posing a risk of interest rates remaining higher for longer than anticipated, according to a Reuters poll of economists. While some central banks were initially predicted to start cutting rates by mid-2024, the survey suggests that a growing number of economists are now pushing the more likely date into the second half of next year.
