News Column

Germany's Bundesbank Warns of Slowing Economic Growth

Oct. 22, 2012
Euro sinking

Germany's central bank warned Monday that Europe's biggest economy faces slowing growth in the run-up to the end of the year amid recession and fiscal austerity in the eurozone.

"There are growing signs that a clear expansion of economic activity in the third quarter 2012 could be followed by stagnation or even a slight decline of gross domestic product in the final quarter of the year," the Bundesbank wrote in its October bulletin.

The bank said demand from Germany's key trading partners in the 17-eurozone had undergone a massive decline, and demand from nations such as the United States and China had also stalled as a slowdown in growth emerged in the world's leading economies.

"Surveys are also reflecting the gloomy outlook for exports and uncertainty about the prospects for global economic developments," the Bundesbank said.

The release of the Bundesbank's latest monthly bulletin coincided with a report from the nation's Finance Ministry also warning that the nation's growth could lose momentum as the year comes to an end.

But the ministry report also said German tax revenues surged 4.2 per cent year-on-year to a record high in September as a solid labour market, strong corporate earnings and a pickup in economic growth helped boost the state's coffers.

The ministry said tax revenue booked by both the federal government and the country's 16 state governments climbed to 50 billion euros (65.2 billion dollars) last month.

Tax collections rose 5.6 per cent in the first nine months compared with the same period last year, raising the prospect of the total tax take for the year climbing to more than 600 billion euros.

"It is likely overall economic activity increased in the third quarter," the ministry's report said.

But it warned the nation could face "a significant economic weakening" in the final quarter of the year amid recession and fiscal austerity in the eurozone.

The solid state of Germany's state finances contrasts with that of many others in the currency bloc, which are struggling to boost revenue and slash government spending in a bid to cut high debt-and-deficit levels.

At the same time, another study released Monday and comparing Germany's industrial performance underlined the major role played by manufacturing in helping Europe's biggest economy to withstand the euro debt crisis and a slowing global economy.

The study of 45 industrialized nations, drawn up by the Cologne-based Institute for the Economic Research (IW), found that Germany now ranked number five as an industrial centre.

This compared with between 1995 and 2010 when it held the ninth ranking. Topping the survey's results were the US, Sweden, Denmark and Switzerland.

Commissioned by the German Economics Ministry, the survey's results were based on a total of 58 indicators to decide on a country's ranking.

However, the survey also warned that Germany faced several key industrial problems including high labour costs and a growing shortage of skilled labour.

Source: Copyright 2012 dpa Deutsche Presse-Agentur GmbH

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