### 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.
German business activity, particularly in the services sector, experienced its sharpest decline since May 2020, leading to concerns about the country's outlook for the remainder of the year and potential stagflation, as both manufacturing and services sectors are contracting.
Germany's business activity has seen a sharp decline, leading to concerns of a recession, as the country's Purchasing Managers' Index (PMI) dipped to its lowest level in over three years. This decline in activity is impacting the wider eurozone economy as well, with the region at risk of slipping into recession. This economic downturn is accompanied by a worrying uptick in inflation and slow growth, particularly in Germany.
Germany, once known as the "sick man of Europe," is facing a new economic downturn characterized by sticky inflation, falling output, and structural issues such as an aging population and high corporate tax rate, prompting concerns of a prolonged recession; however, the country's strong employment levels, record public finances, and adaptability through its Mittelstand of small and medium-sized businesses provide hope for recovery.
German business activity contracted at its fastest rate in over three years in August, with both the services and manufacturing sectors experiencing a downturn, as rising interest rates, customer uncertainty, and high inflation weighed on demand for goods and services.
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 contraction in euro area business activity has intensified, particularly in Germany, leading to expectations that the European Central Bank will pause its interest-rate hike campaign; US mortgage applications for home purchases have hit a three-decade low due to rising borrowing costs; South Korea's exports continue to decline, indicating lackluster global trade; Turkey's interest-rate increase has triggered a rally in the country's assets; shrinking water levels at the Panama Canal due to climate change may cause delays in restocking inventories before Christmas.
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's economic model and banks are struggling, with forecasts showing low growth and poor profitability, highlighting issues such as politicized governance, diminished private sector, and outdated funding methods.
Euro zone manufacturing shows signs of improvement, while China's private PMI unexpectedly rebounds, offering hope for export-reliant economies, but Germany's manufacturing sector remains in a downturn and factory activity weakens in much of Asia.
German exports fell 0.9% in July, less than expected, due to global demand weakness and supply-chain friction.
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 Kiel Institute for the World Economy predicts that the German economy will experience meager growth in the medium term due to factors such as an aging society and a decline in labor potential, emphasizing the need for economic policies that focus on education, infrastructure, and attracting foreign skilled workers.
Germany is predicted to experience a prolonged recession this year, making it the only major European economy to contract in 2023, according to the European Commission, with its growth expectations also being cut for 2024; this is attributed to struggles following Russia's invasion of Ukraine and the need to end energy dependency on Moscow.
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.
The euro zone's economy is expected to grow slower than previously forecasted due to high inflation and Germany slipping into recession, according to the European Commission.
Germany's economy is expected to contract by 0.4% in 2023 due to higher inflation, rising interest rates, and weaker consumer spending, making it the worst-affected major country in the eurozone, according to the European Commission. The overall eurozone economy is expected to expand by 0.8% in 2023 and 1.3% in 2024, leading to a potential halt in the European Central Bank's tightening of policy. Inflation in the eurozone is projected to average 5.6% in 2023.
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 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, once an economic powerhouse, is now the worst-performing major developed economy due to factors such as the loss of cheap Russian natural gas, a slowdown in trade with China, and government inaction on chronic problems, leading to concerns of deindustrialization and the need for urgent solutions.
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.
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.
Russia's economy is expected to grow by 1.5% this year, defying previous projections of contraction and proving more resilient than expected to Western sanctions due to rising oil prices and new export markets, though an eventual slowdown is still predicted.
Germany's economy is expected to contract in 2023 due to skyrocketing energy prices and political insecurity, but economists are hopeful for a rebound in 2024 as inflation eases and wages increase.
Europe's economy is facing trouble as interest rates rise and debt servicing costs increase, particularly in the eurozone where the European Central Bank will struggle to provide support due to the constraints of the euro; fiscal deficits and breaches of budget deficit limits persist, with countries like Italy and France openly defying spending cuts, while Germany's reluctance to break from balanced budgets and increase investment spending exacerbates the contracting economy.
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.
Norway's economy contracted for the first time in four months due to a 0.2% decrease in mainland GDP in August, with the decline primarily driven by the wholesale and retail trade sectors, as well as other industries such as agriculture and fishing; meanwhile, Germany also experienced its fourth consecutive monthly decline in industrial output, with a 0.2% decrease in August and a significant drop in construction and energy production.
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).
Business activity in Germany contracted for a fourth straight month in October, indicating a recession is well underway, as both the manufacturing and services sectors experienced a decline, according to a preliminary survey.
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