Graph of the week: Signs of weakness in the German economy

After the Chinese economy has already been slowing down for quite some time, the past six months have shown a significant weakening of the US economy. Up until quite recently the eurozone economy seemed unaffected by those developments, but that was never going to last. Recent data on the German economy illustrates that external weakness is starting to reach Europe.

Ger gdp ifo exp

The German economy grew at 1.6% in 2014 and 1.4% in 2015. Recent data suggest 2016 could be significantly weaker. Economic weakness in the rest of the world, a somewhat stronger euro and possibly domestic concerns about the banking sector are affecting German business confidence. Expectations of German business leaders have deteriorated sharply, and are now at the lowest level since 2012. This could be an overreaction to recent market turmoil and highly publicized issues in the banking sector. However, in the past German business leaders had a very reliable view on where their economy was heading. As such, the business confidence data are a clear reason for concern.

In combination with the concerns that were already present, these signs of weakness at the core of the eurozone are almost certain to push the ECB into additional stimulus measures at its next meeting on March 10.

This article was written by Bart Van Craeynest

on 23 February, 2016

On completion of his studies in economics at UFSIA, Bart Van Craeynest started work as an economist in the financial sector. In this capacity he has been following economic developments in Belgium and internationally and the impact of the latter on the financial markets for over 15 years. Following a long period at a large bank, he became chief economist at a Belgian financial institution in 2010. Bart Van Craeynest has held the position of chief economist at Econopolis since 2015. He is co-responsible for the economic line of the house and hence closely involved in developing the investment strategy.