World Economy Is Heading for a Crisis

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World Economy Is Heading for a Crisis

Originally appeared at DWN, translated by Karin exclusiely for SouthFront

Apparently the world economy continues to lose momentum. Exports from German companies in May went down significantly. Meanwhile first observers are mentioning the possibility that the German gross domestic product could even have shrunken during the second quarter.

German exports fell in May due to the weak global economy. They went down 1.8 percent compared to the previous month, said the Federal Statistics Office on Friday. This is the strongest decline since August 2015. This ended a run of three consecutive increases. Reuter’s poll of economists had predicted a renewed growth of 0.25 %.

“German exports are sluggish dragging throughout the year,” said the foreign trade chief of the German Industry and Commerce (DIHK), Volker Treier. “Outside of the EU is, due to international crises and low oil prices, hardly any potential for growth.” World trade has already cooled down noticeably. In addition the sanctions against Russia, which exacerbate the difficult business environment for German exporters even more.

The weak exports signal that Europe’s largest economy is expected to have lost considerably momentum after a strong start in the spring – especially in May the production shrank and industrial orders stagnated. “All indicators show a significant slowdown,” said ING economist Carsten Brzeski. DekaBank expert Andreas Scheuerle did not rule out that the gross domestic product could shrink even further in the second quarter.

The outlook for the second half of the year has been clouded by the proposed referendum of the British on United Kingdom membership of the European Union. The DIHK expects for the near future a sharp decline in exports to the UK. According to a DIHK survey, many of the 5,600 companies surveyed are planning with their subsidiary companies in the UK workforce reductions and a reduction in investment. “In the UK choices are to be made as soon as possible to bring back stability” demanded the President of the Foreign Trade Association BGA, Anton Boerner. “For the German economy any delay and the additional long negotiation period means uncertainty.”

Great Britain is the third-largest market in the world after the United States and France for German exporters. Last year, exported goods and commodities were valued at nearly 90 billion Euros. Many managers fear trade barriers after parting of the British from the EU.

The export balance is slightly better looking compared with the same month from last year: businesses sold goods at a value of 97.2 billion Euros abroad, which were 1.6 percent more than in May 2015. Exports to EU countries increased by 2,1 percent. Exports to countries outside the European Union – such as the world’s biggest economies US and China – on the other hand, increased by only 0.9 percent. Imports grew by 0.1 percent compared to the previous month. Exports exceeded imports, calendar and seasonally adjusted by 22.2 billion Euros.

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