Germany is the key to the EU economy. This is not news.
What is news is that Germany’s economy is in the toilet. Not slowing down…. not hitting some bumps.
The Germans are industrial and exporting powerhouses. And the trends for those two things have been in decline for over a year.
Balance of trade for the past two quarters have been the lowest they’ve been since 2016. And the euro has backed off 13% since January of 2018. That’s because so much of Germany’s exports are to other EU countries and they are loaded to the gills with debt.
Furthermore, a big miss to the German Manufacturing Purchasing Managers Index (PMI) in March was confirmed this week by April’s number which was just as horrific. The March 22nd release missed by over 3 points to come in at 44.7 versus expectations of 48.0 (Anything under 50 is considered contraction). Contraction happened (again surprising the market) in February.
In fact, it’s been nothing but misses, some of them similarly horrible, since the beginning of last year.
This is just the most dramatic of falling German economic indicators. But it’s across the board.
Downtrend in Place Since 2017
This is putting Germany on the road to recession.
Again, this isn’t news to anyone watching markets carefully. I present it to cut through the insanity surrounding Brexit and provide some context.
I’ve described Brexit as an existential threat to the EU. It is that and so much more. And it is why everyone on both sides of the channel are working so hard to undermine it.
In my latest for Strategic Culture I name names.
The EU does not want Brexit and if it were to happen it will inflict incredible damage to the British political system and its integrity.
This is really no different than what happened in Greece in 2015.