German Corporate Insolvencies to Rise for First Time in a Decade
The number of German corporations going insolvent is expected to rise for the first time since the 2009 economic crisis.
(Bloomberg) -- The number of German corporations going insolvent is expected to rise for the first time since the 2009 economic crisis.
In the latest sign that Europe’s biggest economy could be on the verge of recession, German credit rating agency Creditreform says the trend for company closures is hitting a turning point. The rate of corporate insolvencies sank by just 0.4% in the first half of the year -- 9,900 corporations have already become insolvent -- and a total of 20,000 are expected by the end of 2019.
German factories are already in a slump after temporary problems last year morphed into a sustained downturn amid global trade tensions. The European Commission revised next year’s GDP forecast for the nation lower on Wednesday, saying the manufacturing weakness risks spilling into the service sector, the biggest part of the economy.
The latest shock came this week when Ludwigshafen-based BASF SE, the world’s largest chemicals company, issued a profit warning.
According to Creditreform, insolvencies among manufacturing and services companies -- excluding construction and trading businesses -- have already risen in 2019. That’s also been felt in the nation’s labor market, where insolvency-related job losses have increased 11.1% in 2019. Overall unemployment is still near a record low.
“Headwinds have increased for the industrial sector, which is especially sensitive to foreign trade risks such as Brexit and trade disputes,” Creditreform said. “This downward pressure could spread throughout the entire economy over the coming months.”
To contact the reporter on this story: Kristie Pladson in Frankfurt at kpladson@bloomberg.net
To contact the editors responsible for this story: Tom Contiliano at tcontiliano@bloomberg.net, Paul Gordon, Brian Swint
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