German recession fears grow as consumption, exports set to plunge

By Rachel More, dpa
Berlin (dpa) – Closely watched indicators for German consumption and exports plummeted on Thursday, painting a gloomy picture for Europe’s biggest economy as the coronavirus crisis threatens to steer it into recession.

The Ifo finance institute’s export expectations index for manufacturing decreased from minus 1.1 points to minus 19.8 points in March, its sharpest fall since German reunification 30 years ago.

That puts export expectations at their lowest level since May 2009, following the financial crash.

“The coronavirus pandemic is slowing down global trade and cross-border logistics is becoming more difficult. This affects Germany as an exporting nation particularly strongly,” Ifo President Clemens Fuest said.

The outlook fell across almost all industrial sectors, he added, noting that manufacturing as well as textiles and clothing were particularly affected.

There was more bad news on Thursday with the release of the GfK institute’s consumer climate index, which also fell to its lowest level since the financial crash.

In their March study, the Nuremberg-based researchers forecast a figure of 2.7 points for April, representing a 5.6-point drop on the current month.

That was the worst result since May 2009, when the financial and economic crisis dragged the consumer climate index down to 2.6 points.

Such a steep fall in consumer sentiment is without precedent since the survey began in 1994.

GfK consumer expert Rolf Buerkl said the institute was withdrawing its consumer forecast of 1-per-cent growth for 2020 in light of the findings.

“Retailers, manufacturers and service providers must prepare for a recession,” he added.

“A reliable forecast regarding consumption can only be made once we can predict how long the protective measures to combat corona will remain in place.”

Germany is freeing up hundreds of billions of euros in aid for struggling businesses in a bid to lessen the blow of coronavirus restriction measures and the resulting economic slowdown.

On Wednesday, lawmakers approved an emergency budget financing a coronavirus aid package that foresees 156 billion euros (167 billion dollars) in new debt, flouting the country’s long-held fiscal rules.

Among other things, the emergency budget finances a 600-billion-euro bailout fund for large firms to help them weather the coronavirus crisis.

Germany has also revived short-time work, a tool last used during the financial crisis, to partially pay the salaries of employees for companies who no longer have work for them.

On Thursday, carmaker Daimler and leisure airline Condor became the latest German firms to join the scheme.