Deutche Bundesbank, the German central bank has announced that it is possible that German economy output may fall slightly in the third quarter. This has sparked concerns on markets since German economy has declined by 0,1 % in the second quarter. Economic decline in two consequent quarters is a textbook definition of recession. This rather bleak outlook has been caused by several leading companies announcing lower than expected earning and or outlooks.
In response, the German government has indicated that it is prepared to increase spending in order to attempt to stave off the recession. In addition, rumors have surfaced that Germany may even ditch its balanced budget rule to make the stimulus more effective. In addition, there has been talk that the European central bank may also intervene with stimuli of its own.
It remains to be seen if these negative news will move EU leader to a more conciliatory tone in Brexit talks, since it is likely now that a no deal Brexit would lead to a EU wide recession.
Source: Bloomberg
