Germany Barely Dodges Recession, or Does It?


New data from the German Federal Statistics office show that the nation's economy barely grew at all in 2012. Gross domestic product improved 0.7%. By most measures, GDP shrank in the fourth quarter, although numbers on the period will not be released until next month. Germany was unable to hold off the effects of the European recession, despite the title of the government's release of the information: "German Economy Withstands the European Economic Crisis in 2012."

For some reason, Roderich Egeler, President of the Federal Statistical Office, said, "In 2012 the German economy proved to be resistant in a difficult economic environment and withstood the European recession." However, he admitted, "In the second half of the year, however, the economic activity in Germany slowed down considerably." The economy in the European Union is bad enough, and it shows little sign of improvement. Germany's GDP could shrink in early 2013, if the trend continues. And it will.

Germany's largest trade partners outside the EU are the United States, Japan and China, as would be expected given the size of the economy of each based on GDP. China's economy is healthy, based on almost any measure released by the People's Republic. Japan already has entered a new recession, as indicated by most of its government numbers. GDP in the U.S. has grown by a little better than 2% recently, and unemployment has improved. But business and consumer sentiment were damaged by the fiscal cliff debate, and the upcoming debate over federal expense cuts and the debt cap probably will drive confidence even lower.

Germany's business and services sectors have nowhere to turn for renewed growth except to their own citizens and China. Consumer and business confidence has to be flagging in Germany, based on the likely reaction to the Federal Statistical Office numbers and what they represent. And China by itself, it has already been shown, is not large enough economically to pull most of the rest of the world out of recession.

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