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Upcoming election has German economy on tenterhooks

Much of what happens with the German economy depends on Sunday’s elections, with the leading candidates neck-and-neck

The DAX fell sharply at the beginning of the week, before rising again on Wednesday and Thursday. From 15,722.99 on 14 September, the DAX fell then rose again to 15,651.75 last Thursday. From there, it plummeted at the beginning of this week, falling to 15,132.06 on Tuesday. By today, however, it had recovered somewhat to 15,661.47.

The overall drop comes against a backdrop where many feel the German economy is beginning to falter. Earlier this week, reports in Handelsblatt indicated GDP growth was set to be much lower than predicted. As Handelsblatt wrote: “With the Institute for the World Economy, the last of the five major economic research institutes is also lowering its economic forecast on Thursday. For 2021, the people of Kiel only expect gross domestic product (GDP) to grow by 2.6% instead of 3.9%. The Ifo Institute lowered its outlook on Wednesday from 3.3% to 2.5%.”

Supply bottlenecks

The lowering of expectations is said to be related to supply bottlenecks and consumer restraint. A report from IHS Markit, which was covered by Reuters, looked at the country’s manufacturing sector. “IHS Markit’s flash Purchasing Managers’ Index (PMI) showed growth in the manufacturing sector slowed to an eight-month low reading of 58.5 from 62.6 in August,” the news agency reported.

“The subindex for the services sector slipped to a four-month low of 56.0 from 60.8 in August. As a result, the flash composite PMI, which tracks the manufacturing and services sectors that together account for more than two-thirds of the German economy, dropped to a seven-month low of 55.3 from 60.0 in August.”

Much of what happens with the German economy will be determined by Sunday’s elections, which will select the country’s new leader as Angela Merkel steps down as chancellor after 16 years in power. Currently, the race between the various candidate is neck-and-neck, with no clear favourite emerging.

CNBC wrote recently on Sunday’s implications for the economy: “In 2019, almost a quarter of the EU’s gross domestic product (24.7%) was generated by Germany, according to Eurostat, and so how the country is governed – at a time of transition in terms of global trade and consumer trends – matters.”

Pete Carvill

Pete Carvill is a reporter, writer, and editor based in Berlin who has been writing for the B2B and mainstream media since 2007. He is a contributing writer for Expert Investor and, in addition, has...

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