Engine of the eurozone, industrial powerhouse, export world champion – just some of the ways Germany’s economy has been described over the years.
However, recent figures have indicated that the good times have come to an end, with Europe’s largest economy stuck in recession.
With economists looking for clues as to how long this could last, all eyes will be on the final reading for Germany’s July inflation figure when it is released on Tuesday morning. The year-on-year consumer prices index (CPI) rate is forecast to come in at 6.2%, just slightly lower than the 6.4% recorded in June.
Industrial production figures for June, out on Monday, will also give more insight into what is going on in the nation’s manufacturing backbone, which includes global carmakers such as Volkswagen, BMW and Mercedes, as well as the network of small and medium-sized engineering businesses known as the Mittelstand.
If the July inflation comes in as anticipated, it would mean Germany’s price growth remains some way above the headline level for the eurozone, which was 5.3% in July. The picture is even worse compared with Spain, where inflation was just 2.3% last month.
Sticky inflation is proving part of Germany’s current economic woes, especially when coupled with stagnant growth. “Slowcession” is the result, according to one economist.
Carsten Brzeski, global head of macroeconomics at the Dutch bank ING, describes the German economy as being “stuck in the twilight zone between stagnation and recession”.
It was May when the country’s economy was confirmed as being in recession. Revised official figures showed its performance was worse than originally thought and that it had in fact shrunk by 0.3% between January and the end of March, after a contraction in the final three months of 2022. Higher prices had forced households to rein in their spending at the start of this year, which had a bigger impact on growth than originally thought.
The second quarter, from April to June, was not much better. Forecasts had anticipated a small bounce-back in growth; instead it stagnated, coming in at an underwhelming 0%. Hence the “twilight zone”.
Germany’s companies are also feeling gloomy: the closely watched business climate index from the Munich-based Ifo economic research institute dropped for the third consecutive month in July. Brzeski puts this down to ongoing monetary tightening from the ECB, fears about the US economy, and a weaker-than-anticipated reopening in China – the market for many German exports, from fast cars to machinery.
To shake off the shadow of stagflation, Brzeski is calling on German ministers to urgently introduce a reform agenda.
That may not be forthcoming anytime soon, in part because the chancellor, Olaf Scholz, and German parliamentarians are, like much of the continent, currently on their summer break.
Responding to the latest quarterly growth figures just over a week ago, the economy minister, Robert Habeck, called the figures “anything but satisfactory”, despite the slightly positive trends in private consumption and investment.
However, Habeck showed little appetite for an economic stimulus package, saying this would only further fuel inflation.
“Whoever distributes money with a watering can in times of high inflation only brings one thing to growth: inflation,” he said.
The German government may yet strike it lucky, and find the situation has improved somewhat while they were enjoying their holidays. The labour market continues to hold up well, with a seasonally adjusted unemployment rate of 5.6% in July, lower than the level seen in June.
There was also some surprising data on Friday, when German factory orders defied all expectations with the biggest monthly jump in the past three years. Economists were surprised when the figures showed a 7% rise from May to June, thanks to a pick-up in major orders, including for machinery and aircraft. Airbus, which has a large factory in Hamburg as well as other smaller plants across the country, said it had seen a surge in aircraft orders in June.
For now, it is unclear whether this is a temporary respite or a sign that the eurozone’s largest economy is finally beginning to rebound from its recent troubles.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
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.
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.
