Now the Federal Statistics Office has made it official: Germany is in recession. Not a good day for Europe this.
The dollar hit a four-month high against the euro on Thursday after Germany, the eurozone's largest economy, went into technical recession as its exports dropped sharply and domestic demand remained weak. As expected, the Federal Statistics Office confirmed gross domestic product fell 0.1 per cent quarter-on-quarter, adding to a 0.2 per cent drop in the first three months.
Exports, which have supported Germany's economy during the downturn of the last two years, were hit in the second quarter by the single currency's steep climb to over $1.19 against the dollar in May. However, revisions to first-quarter data showed that exports fell in the first three months also, after a previously reported rise. "We have emphasized for months now that the rapid increase in the euro would add another unneeded drag on the eurozone economy, said Steven Saywell at Citigroup. "We take these data as confirmation of our view that the eurozone economy cannot sustain euro-dollar at current levels." The euro has sustained a sharp sell off in recent sessions as upbeat US data compared with bleak European numbers have led investors to sell the single currency and buy dollars on expectations the US economy will recover fastest from the global slowdown.
Source: Financial Times