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From the Volkswagen Emission Scandal to Slowdown in China: What Might Cause Derailment of Germanys Growth?

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Published on : Oct 05, 2015

In Germany, Volkswagen’s emission scandal has called question on the industrial prowess of the country. In addition, export have been threatened by the slowdown in Chinese auto markets and other emerging markets, and influx of immigrants in Germany has also added to the woes of the   nation’s finances. 

The data that will be released this week will hint if the largest economy in the euro zone would survive the headwinds that have accrued in the last couple of weeks or it is at a risk of running aground.

As the euro zone’s growth depends considerably on the economic conditions of Germany, the President of the European Central Bank Mario Draghi is vigilant about challenges that may crop up in near future. 

A refurbished slide on energy prices has worked to counter the effects of the quantitative-easing program, which has helped to pushed inflation rate at sub-zero and has also stirred a debate regarding the need for added stimulus in the instance of failure of Germany’s recovery.

As commented by Stefan Schneider, who is an economist at Deutsche Bank AG, Germany has the capacity to survive the headwinds, however, there are chances of unpleasant surprises. This is because the global perspective has deteriorated which is unlikely to be benefitted by investment spending.

Recently, as commented by a London-based market economist, the drop in Germany’s manufacturing and services activities has been assesses to be more than what was initially reported. About the Purchasing Managers’ Index, from August to September the numbers declined from 55 to 54.1. Earlier in September, a preliminary reading taken was for 54.3.

As the week progresses, the state of the all-important manufacturing industry in Germany will be assessed, with releases pertaining to August factory orders as well as industrial production.