German economy enters recession

As widely anticipated the German economy had hit recession in the third quarter and this represents the worst recession for 12 years as the Gross Domestic Product (GDP) fell by 0.5 percent according to the Federal Statistics Office.

The sudden and deep GDP decline has been greater than economists’ predictions who moderately expected a 0.2 percent decline.

According to Capital Economics, the research group, Germany’s own data reveals the true situation to be far worse as the country is seemingly heading towards the worst recession since the start of the Second World War.

The biggest cause of the decline has been the fact that both domestic demand and export demand has fallen, which has resulted in German companies cutting back their production levels and having to make job cuts as they suffer heavy losses.

Siemens AG reported a profit decline today and plans to cut 16,750 jobs by 2010 in order to remain in business.

Up until the third quarter, the economy had actually grown by 0.8 percent when adjusted for working days, but the third quarter was far harsher, as both consumer and government spending was down, coupled with weaker exports and a rise in imports.

According to the Organisation for Economic Cooperation and Development and the International Monetary Fund, both the US and the euro zone will suffer a simultaneous and prolonged recession, something that has not happened since after the Great Depression.

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