A Double Dip In Germany?

The concern that the Japanese economy has reached a point of stagnation has grown recently as its fourth quarter GDP figures failed to show a substantial recovery. More analysts have questioned the power of Japanese government programs to stimulate economic activity when exports are being hurt by a slow recovery in much of the West and Japanese unemployment is high by historic standards.

Germany can be added to the list of large nations which may not be able to sustain a recovery in 2010.

Germany was the largest exporter in the world until it gave up that distinction to China in 2009. The German economy has been slowed by low demand for its manufactured goods. The government announced today that GDP in the country dropped by 5% last year. Perhaps of greater concern is the belief that Q4 GDP did not move up at all. The Wall Street Journal reports that “Destatis (the German statistics bureau) didn’t give a formal estimate for GDP in the fourth quarter, but the figures appear to suggest that the economy’s momentum weakened significantly, after growing by 0.4% and 0.7% in the second and third quarters of last year.”

The report from Germany shows that stimulus activity on the part of governments cannot offset a sharp drop in exports, high unemployment, and a rapid contraction in consumer spending. The German economy appears to be entering a period of little growth, or perhaps modest contraction,–a classic double-dip recession.

Economic problems in the US bear a similarity to those in Germany. Unemployment and consumer spending are not improving. US exports have increased, but not to the healthy level they enjoy during rapid economic expansion.

A second recession among developed nations may have begun to take hold at the end of last year and could ruin the hopes that 2010 would be the end of the most troubled period in the economic history of the last eight decades.

Douglas A. McIntyre