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German Economy -The Leader of Fall ?

Last week as the world focused on the USA Debt limit, the first large economy where red a recession though it is technical ( two quarters with continuous negative growth) in nature. The more important concern is that the European manufacturing hub Germany entered a recession. This is important as this might export slower growth to other countries as it is one of the major importers for them.

Though Germany and other countries in Europe were able to avoid an energy crisis during the mild winter. The manufacturing sector is showing signs of weakness as the current month’s Flash PMI for manufacturing was at 36 months low.

This accompanied by large companies such as BASF shifting their base out of the country indicates a long road to any recovery in future.

Another issue that even Flash PMI indicates is that despite the slowdown inflation has seen some upward pressure in recent months. This along with the ECB focus on further rate hikes would create more downward pressure.

Given such a trend where recession is accompanied by rate hikes and inflation the financial and manufacturing industry stability is the main focus. This might also be the reason that in the past month, European Automotive and Financial Sectors have seen $120 Bn worth of CDS trade that insures the buyer against any default.


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