German Recession May Have Already Started

Destatis said of Germany’s GDP:

The German economy is slow in gaining momentum. Compared with the previous quarter, the gross domestic product (GDP) increased by 0.1% in the first quarter of 2013 after adjustment for price, seasonal and calendar variations.

The data were immediately put next to that of France for the same period, which show that a new recession in France is underway. INSEE (The National Institute of Statistics and Economic Studies) reported on French GDP:

In Q1 2013, French growth domestic product (GDP) in volume decreased again: –0.2% after –0.2% in Q4 2012. It is the third decrease in the last four quarters.

Depending on the number of future corrections of the German and French numbers, either or both country could be worse off.

The case that Germany has returned to recession is easy to make. The most powerful argument is that Germany’s key trading partners — those within the European Union — cannot support healthy German exports. This leaves other trade partners, led by the United States and China, to balance the difference. U.S. GDP has ticked higher by only 2% so far this year. China’s, by nearly every measure, has slowed.

The core of the Germany economy has been efficiency, prowess in modern manufacturing and the exports of high-priced goods. Like every other large developed nation, Germany has a big middle class. Consumer spending within its own borders might keep the Germany economy at the tiniest level of growth. But its consumers must see the writing on the wall. As their own economy grows, so will reasons for caution.

The arguments that Germany’s economy has moved back into recession this quarter are much more compelling than those that it has not.