German Economy, EU's Biggest, In Recession

Mighty Giant Falls As Leading Economic Group Declares All Developed Economies In Recession

(CBS/AP)  The German economy, Europe's biggest, tipped into recession in the third quarter as weakening exports fueled a bigger-than-expected fall in national output, government figures showed Thursday.

That news came as a leading international economic organization said all the world's developed economies were in recession and were likely to contract in 2009.

The Paris-based Organization for Economic Cooperation and Development said Thursday that gross domestic product was likely to decline by 0.3 percent in 2009 in its 30 member countries, with the U.S. contracting by 0.9 percent, Japan by 0.1 percent and the euro currency area by 0.5 percent.

The latest forecasts represented a sharp downgrade since the last one in June, when the organization forecasted member country growth of 1.7 percent in 2009 and indicated that the worst of the financial crisis may have passed.

Gross domestic product in Germany contracted by 0.5 percent in the July-September period compared with the previous quarter, the Federal Statistical Office said - a much sharper fall than the roughly 0.2 percent decline economists had expected.

That followed a 0.4 percent fall in GDP in the second quarter, which was the first decline since late 2004, and a 1.4 percent growth rate in the first quarter.

A technical recession is defined as two consecutive quarters of negative growth.

The statistical office said a slight increase in consumer and government spending in the third quarter, during which the global financial crisis gathered pace, was offset by falling exports and a large increase in imports.

Exports are a mainstay of the German economy and largely powered its stronger performance over recent years.

Holger Schmieding, chief European economist at Bank of America, said the third-quarter economic decline may be "just the beginning."

"Late 2008 and early 2009 could well be worse," he said. "Germany - and the euro zone - have to get ready for a serious recession."

Economists said the bigger-than-expected fall was partly explained by upward revisions to the first- and second-quarter figures - previously reported as a 1.3 percent rise and 0.5 percent decline.

In addition, the euro reached record levels against the U.S. dollar during the quarter and oil prices hit all-time highs. Both have since retreated.

Still, Thursday's figures pointed to more trouble ahead. Schmieding forecast that the German economy would shrink by 0.6 percent in both the current quarter and next year's first quarter.

Timo Klein, an economist at IHS Global Insight in Frankfurt, said that "net exports will stay on a weakening trend for most of 2009, due to faltering euro zone and indeed global demand."

The euro's decline against the dollar "will offset this only partially, as the pace of growth in foreign countries is a much more important variable for German exports than the exchange rate," he added.

Klein said declining oil prices and inflation could support private consumption, but fears over jobs could hold back consumer spending.

The government is predicting growth of 1.7 percent for the whole of 2008, but forecasts the economy will slow to 0.2 percent next year.

On Wednesday, its independent panel of economic advisers offered a gloomier outlook, forecasting zero growth in 2009.

In an effort to reduce the impact of the economic crisis, the government is pushing through a stimulus package ranging from tax breaks on new cars to credit assistance for companies. It is aimed at triggering investments of up to 50 billion euros ($63 billion).

[noloyalisti]

The German government made the same mistake as the US government. They trusted the crooked, right wing criminals who run the corporations and our government. The Germans didn''t learn about fascism enough from Hitler, I guess.

[lochlan-2009]

jamesm12341

That''s what I thought.

[lochlan-2009]

All part of the "New Financial Order" an international monetary regulations organization, or a government that rules the worlds money.

James1234, you are such a hack. The Bush Regime, and the GOP were who steared the US into the ********* for the Oligarchy and their agenda, these last eight years. Blaire did it for the Brits. Chirac with France. Etc., etc..

You really do have know shame, do you? Lie and spin, it''s the republican way. In case you didn''t notice, the MAJORITY of Americans voted against your ethics and government.

[renonv5]

I think it''s called the dominoe effect. It''s a global issue.

[markavelli2]

"""Wow!! Bush must be in charge of Germany to!! right libs?"""

What''s that supposed to mean? Are you so naive to think that our economy doesn''t effect other country''s economy?

[ajaxtheleast]

Wouldn''t it be funny, to some, if
the world ISN''T heading for a recession
but for "normality" adjusted for the
increase in the world''s popuation or
in adjustment to some unknown variables
of which our financial geniuses
haven''t a clue?

Like the geniuses that are now standing
there throwing stuff at the wall hoping
something sticks.

What if the seven-hundred-thousand dollar
"wood"-constructed McMansions ARE worth
only fifty-thousand dollars in the "normal"
economy,,,,And the thirty-dollar-an-hour
auto worker and the like wages ARE three
times higher than what
a company can afford to pay?

"Funny"?,,,Maybe not.,But the justice of
returning to this "normal economy"
brought down upon human indifference to
the consequences of their greed would
be well deserved.

Of recent governments around the world
"planning" for our future and it''s life-
sustaining resources,,,
I keep seeing maggots on a dead horse.

[gop_will_win]

If history repeats, we can expect a republican sweep in Germany soon. Oh joy!

[nojoy01]

The ''D'' word is not used, no matter how bad the numbers are, because it ''scares'' people. And scared people start demanding results, not promises, so the ''D'' word is never used & probably will never used again, except for describing the bad old days.

[earache4]

Just curious, When will the global "R" word be replaced with the global "D" word?