Even if Germany’s economy finally begins expanding again in 2024, it’ll struggle to shake off the funk behind one of its weakest annual performances in a generation.
(Bloomberg) — Even if Germany’s economy finally begins expanding again in 2024, it’ll struggle to shake off the funk behind one of its weakest annual performances in a generation.
Beset by energy woes and creaking infrastructure, hit by a downturn in global demand, and lagging in the race for electric-vehicle dominance, the country was probably in recession as it ended 2023 with a shock court decision that undermined Berlin’s whole strategy for budget financing.
“We’re pretty pessimistic for German growth this year,” said Stefan Schneider, chief economist for Germany at Deutsche Bank Research. “A combination of cyclical and structural pressures are currently crushing the hope that the country can untangle its knot and return to its previous growth rates of 1 1/2-to-2% in the foreseeable future.”
While surveys have pointed to a possible bottoming out in the country’s manufacturing malaise, reports in coming days may also underscore just how far it has fallen.
Factory orders in October were close to the lowest level since mid-2020, and economists anticipate data on Monday to reveal an increase of 1% in November, nowhere near enough to repair the damage. Exports will be released the same day.
On Tuesday, data on industrial production — also languishing at a similarly low level — will show if it too finally began recovering after five successive months of declines.
The overall impression may point to a second quarter of contraction, conventionally described as a recession. A fuller indication will be available on Jan. 15, when German officials reveal the Group of Seven’s first national estimate for 2023 full-year gross domestic product.
That will probably feature a small annual decline, predicted by the Bundesbank at 0.1%, while the European Commission has projected a 0.3% drop.
The only times in the past two decades that Germany fared worse were in 2009 — as the global financial crisis raged — and then during the pandemic shock of 2020.
The country limped into 2023 just avoiding a widely predicted recession, but beset by a crisis over its gas supply after Russia’s invasion of Ukraine that has yet to be sustainably resolved.
While the answer of Chancellor Olaf Scholz’s coalition was to double down on the transition to climate-friendly energy, its method of doing that — off-balance sheet special funding vehicles — has just been effectively slapped down by Germany’s top court.
Ministers have since cobbled together redrafted budgets for both 2023 and 2024, but the bigger question of how to retool the economy to make up for years of under-investment remains unresolved as the government struggles with a constitutionally enshrined borrowing limit that calls for near-balanced budgets.
Scholz’s political challenge is compounded by the potential of more and longer train strikes, farmers angry at the removal of subsidies, and the rise of the far-right Alternative for Germany, which is likely to make gains in regional elections later this year in its strongholds in the country’s east.
Germany’s economic woes aren’t only energy-related, as staff shortages heap pressure on its manufacturing-based business model. And at a time when China’s BYD Co. has surpassed even Tesla as the world’s biggest maker of electric vehicles, the country’s VDA auto lobby said on Thursday that production of passenger cars last year was still 12% below the level of 2019.
Given that backdrop, the Bundesbank anticipates overall growth of just 0.4% this year. That would be an improvement on 2023, but still one of its poorest outcomes this century, in tandem with inflation that officials reckon will linger for longer than in other major euro-zone economies.
Schneider of Deutsche Bank says another annual contraction of 0.2% could be on the cards, though even he sees the prospect of a pickup in due course.
“The hope is that from the spring onwards, as households’ real incomes in particular rise, inflation continues to fall and households’ optimism perhaps also rises a little, we will be able to get out of this tailspin,” he said. “Private consumption is likely to save us from a significant economic downturn.”
By contrast, one economist who is more optimistic is Stefan Muetze at Helaba, who reckons that the combination of a pickup in consumer spending, industrial demand and investment in the green transition could drive growth exceeding 1%.
“Our thesis is that things will get better in 2024, also in industry,” he said. “We assume that exports will recover somewhat over the course of the year.”
—With assistance from Joel Rinneby.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
The Canadian Press. All rights reserved.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
The Canadian Press. All rights reserved.
OTTAWA – Statistics Canada says the country’s merchandise trade deficit narrowed to $1.3 billion in September as imports fell more than exports.
The result compared with a revised deficit of $1.5 billion for August. The initial estimate for August released last month had shown a deficit of $1.1 billion.
Statistics Canada says the results for September came as total exports edged down 0.1 per cent to $63.9 billion.
Exports of metal and non-metallic mineral products fell 5.4 per cent as exports of unwrought gold, silver, and platinum group metals, and their alloys, decreased 15.4 per cent. Exports of energy products dropped 2.6 per cent as lower prices weighed on crude oil exports.
Meanwhile, imports for September fell 0.4 per cent to $65.1 billion as imports of metal and non-metallic mineral products dropped 12.7 per cent.
In volume terms, total exports rose 1.4 per cent in September while total imports were essentially unchanged in September.
This report by The Canadian Press was first published Nov. 5, 2024.
The Canadian Press. All rights reserved.
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