Germany: Recession fears – ING

According to ING analysts, the German economy appears to be stuck between solid domestic fundamentals and external risks with industrial slowdown beginning to have an impact on the domestic economy while the entire economy seems to be flirting with recession.

Key Quotes

“Cars have played and will continue to play an important role in this situation and among the multiple explanations for the problems in the automotive sector, surprisingly is China. Understanding recent developments in the Chinese automotive market is an important piece of the puzzle in comprehending the outlook for the German automotive market.”

“The delayed introduction of the new emissions standard - the worldwide light vehicles test procedure, or WLTP - and delays in complying with these new standards led to severe disruptions in German automotive production and delivery. The US-China trade war and subsequent slowdown of the Chinese economy have also contributed to Germany's car problems.”

“So, we think the current crumbling of the Chinese car market appears to be a simultaneous combination of cyclical factors, one-off effects and structural changes.”

“And for the German economy, it's not actually the trade conflict that is most concerning but the structural shifts in the Chinese automotive market, which could turn out to be one of the biggest threats in the years ahead.”