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Germany to Reveal Size of Recession Risk: Global Economy Week

Simon Kennedy
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Germany to Reveal Size of Recession Risk: Global Economy Week

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Europe’s largest economy gets a health check this week with German data due to reveal whether it managed to avoid shrinking in the second quarter.

The export-reliant nation is being squeezed by the trade war between the U.S. and China and speculation is mounting that it may be headed for recession. Big-name companies including Continental, Daimler, BASF and Lufthansa have all slashed their outlooks.

Industrial production registered its biggest annual decline in nearly a decade in June, confidence indicators have fallen and data last week showed exports are dropping too. The previously strong labor market is also showing signs of cracks.

Bloomberg Economics reckons the gross domestic product report on Wednesday will show the economy contracted 0.1% in the second quarter from the prior three months, a view that matches the median forecast of economists surveyed by Bloomberg. The overall euro-area economy expanded 0.2% in the period.

“This will give the European Central Bank yet more reason to act in September,” said Jamie Rush, chief European economist at Bloomberg Economics. “The latest indicators suggest below-trend growth will continue in the second half. But there’s a risk that weakness in the industrial sector spreads to services and begins to impact the job market.”

Here’s our weekly rundown of other key economic events and click here for more from Bloomberg Economics:

U.S. and Canada

After another week that rocked expectations for how much more stimulus the Federal Reserve will deliver, the U.S. central bank’s calendar is pretty empty this week ahead of the Jackson Hole symposium later in August. Indicator highlights include a run of big data on Thursday including retail sales and industrial production, both of which are projected to show growth. Wednesday’s consumer inflation report for July is expected to show prices grew 1.7%. Canadian data includes existing home sales for July on Thursday.

New Tariffs Threaten to Push Down U.S. Sentiment

For more, read Bloomberg Economics’ full Week Ahead for the U.S.

Europe, Middle East and Africa

As well as Germany’s GDP report, other highlights for next week include the ZEW survey on Monday. Norway’s central bank is predicted to keep interest rates unchanged at 1.25% on Thursday. The week will end with the euro area publishing its latest snapshot of trade.

Labor market, inflation and retail figures will reveal some of the British economy’s vital statistics during its long-promised final summer in the European Union. Those data will provide the Bank of England with added information to gauge whether the economy needs tightening or easing of monetary policy.

U.K. Inflation Set to Slip Below Target

Weighed down by sanctions and a global trade war, Russia’s second-quarter economic growth could disappoint next week even with the median expectation in a Bloomberg survey seeing the expansion at just 0.8%. That’ll heap more pressure on President Vladimir Putin’s administration, which has been promising a pickup.

Israeli inflation data on Thursday will inform whether the once-hawkish central bank looks to join the global easing party. Zimbabwe will publish monthly inflation on Thursday after the statistics office suspended the reporting of annual inflation -- which was at more than 150% -- for six months.

For more, read Bloomberg Economics’ full Week Ahead for EMEA

Asia

Investment, output, retail and jobs data from China for July will be closely watched Wednesday to gauge how well the world’s second-largest economy is weathering the trade war. Bloomberg Economics reckons industrial production and retail sales both slowed.

China Factory Output, Retail Sales, Investment

For markets, the yuan’s daily moves are taking center stage as investors try to work out whether a move past 7 per dollar represents a deliberate push by Chinese policymakers to weaken the currency in response to the Trump administration’s tariff threats. In Australia, jobs numbers for July will be key to the central bank’s next move. Governor Philip Lowe has said a lower jobless rate is needed to generate a pick up in wages and inflation. If that level rises on Thursday, traders will add to bets on yet more stimulus.

Stronger Hiring Needed to Tighten Australia’s Labor Market

For more, read Bloomberg Economics’ full Week Ahead for Asia

Latin America

Mexico’s central bank may finally join its Latin American peers with a cut to the benchmark interest rate. Economists expect Banxico to lower its key rate, currently at a decade-high of 8.25%, by 25 basis points on Thursday as growth stagnates and inflation slows to within the target range.

Mexico Monetary Policy Rate

Elsewhere, Brazil’s June economic activity, due on Monday, may shed light on whether Latin America’s largest economy fell into technical recession in the second quarter. Argentina’s July inflation data, due on Thursday, is likely to cool for a fourth straight month, a welcome sign for President Mauricio Macri as he seeks to restore confidence in the economy before October’s presidential elections.

For more, read Bloomberg Economics’ full Week Ahead for Latin America

To contact the reporter on this story: Simon Kennedy in London at skennedy4@bloomberg.net

To contact the editors responsible for this story: Stephanie Flanders at flanders@bloomberg.net, Zoe Schneeweiss

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