Germany’s Economy Feels for a Bottom Near Recession Shoals

(Bloomberg) --

German exporters are sending ever so slightly encouraging signals that the worst of an industry slump might be behind them, an improvement that may come too late to prevent a recession in Europe’s largest economy and a spillover into the rest of the region.

Manufacturers in Germany saw shallower declines in output and export orders in October, and business confidence in trade improved thanks to better expectations among wholesalers. Yet the outlook is far from optimistic, and data on Nov. 14 may well show the nation’s economy shrinking for a second straight quarter. Bloomberg Economics sees GDP in the July-to-September period contracting by 0.1% — the same as the previous quarter.

Months of weakening world growth and demand for high-tech German goods has left companies struggling to retain workers. Linde, Bosch and Schaeffler are among those cutting jobs. Other firms including Kloeckner have lowered earnings forecasts in response to the global slowdown.

The rest of the euro area isn’t immune. IHS Markit’s measure of manufacturing for the bloc as a whole stayed in contraction territory for a ninth straight month. Bloomberg Economics says the 19-nation economy probably expanded just 0.1% in the third quarter, and may not improve much in the final three months of the year.

In his last press conference as president of the European Central Bank, Mario Draghi pinned the troubles largely on developments outside the region.

“This slowdown in growth mainly reflects the ongoing weakness of international trade in an environment of persistent global uncertainties, which continue to weigh on the euro-area manufacturing sector and are dampening investment growth,” he said Thursday.

Charting the Trade War

As Britain tries to figure out its split with the European Union, it’s attempting to maintain current trading relationships to avoid reverting to World Trade Organization terms after exiting the bloc.

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To contact the editor responsible for this story: Brendan Murray at brmurray@bloomberg.net, Zoe SchneeweissFergal O'Brien

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