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Is the downturn over? | TIME ONLINE


It's been just half a year since the newspapers headlined "Fear of Recession" (Commercial sheet) "Germany on the way to recession" (The world) or "We have to see the recession as an opportunity" (the daily newspaper). The German economy, it looked at the time, was moving towards an abyss. It is now one step further – and suddenly, where a huge hole should gap, it feels like solid ground under your feet. Can it be that it was already? That German workers, savers, consumers, taxpayers and entrepreneurs, i.e. all those involved in the economy, can get away with a few scratches?

The low on the job market has been overcome

Sources: destatis, Institute for Labor Market and Vocational Research, International Monetary Fund, ZEW © TIME graphics

In fact, there is a lot to be said for this – even if the bad news has been piling up recently: the German economy grew by a measly 0.6 percent last year, the Federal Statistical Office calculated. That was the last slow growth in 2013. At the same time, the Federal Employment Agency registered more people without a job at the end of the year than in the previous year (an increase from 18,000 to 2.2 million unemployed) – that has not happened since 2013 either. In addition, more and more companies are applying for short-time work. That means: you send employees home for whom there is not enough work to do, and the employment office then pays short-time allowances to replace the lost wages. Eight percent of all industrial companies currently use this instrument, 15 percent plan it, as a survey by the Ifo Institute shows. So there could be more bad news in the next few weeks.

But the growth figures from last year reveal nothing about the future, and the job market is particularly sluggish when it comes to economic fluctuations. Last but not least, it shows when the trend is turning. And there are many indications that it has changed, that the downturn has stopped. "We expect a moderate global recovery," said new head of the International Monetary Fund (IMF), Kristalina Georgieva, at the World Economic Forum in Davos on Monday. It is good news that the United States and China have agreed on an initial agreement in their trade dispute. For Germany, which is particularly heavily dependent on world trade, the IMF is now forecasting growth of 1.1 percent this year – that's not a lot, but at least about twice as much as last year.

The mood is getting better

ZEW index on economic expectations

Sources: destatis, Institute for Labor Market and Vocational Research, International Monetary Fund, ZEW © TIME graphics

Another positive signal came on Tuesday: The economic expectations of financial experts "have risen again significantly", reported the Mannheim research institute ZEW. Its ZEW index is a so-called mood barometer – such indicators are particularly suitable for early detection of a turnaround. The ZEW index has been rising for almost half a year now. The ifo index, which records the business expectations of entrepreneurs, has also been improving since September. And even a survey in the employment agencies (the IAB labor market barometer) shows that worries there have been slowly decreasing since August.

Is that already the turnaround? Timo Wollmershäuser, head of economic research at the Ifo Institute, is cautious, he says: "The downturn pauses, the economy stabilizes." But he doesn't want to talk about a new upswing yet. Enzo Weber, economic expert at the Institute for Labor Market and Vocational Research, puts it in a more confident tone: "The downturn is largely over." Weber had half a year ago when everyone was facing an impending recession talked, represented a different view. Under the heading "This is not a crisis", he explained at the timeInterview that it is a normal downturn and that it will probably be overcome in the next year. In this he sees himself now confirmed.

Of course, there are risks: US President Trump could now direct his furor back to a trade war with the Europeans, the conflict with Iran could flare up again, and Brexit may end up in chaos. "But there are always such risks," says IAB researcher Weber. "You can find a long list of risks in every economic report in recent years." A certain amount of the unpredictable is part of the economy.

Growth expected

Percentage change in gross domestic product compared to previous year (price adjusted)

Sources: destatis, Institute for Labor Market and Vocational Research, International Monetary Fund, ZEW © TIME graphics

A peculiarity of the recent downturn, however, is that it is almost entirely limited to industry. While many service sectors feel no decline and the German economy as a whole grew, parts of the industry went downhill significantly. Especially in the automotive industry. Last year their production dropped by nine percent. The reason is not so much a lack of demand, says Ifo researcher Wollmershäuser. In Germany, five percent more cars were registered last year, especially German makes. "But they came from the foreign factories because the German manufacturing facilities are being converted to e-mobility." In other words: abroad delivers the cars with the old technology, while Germany switches to the new one.

Does that prepare the ground for a new upswing? At the weekend, the business service Bloomberg reported that there was a new leader in its annual ranking of the most innovative economic nations. After South Korea was at the top for six years in a row, another nation is now at the forefront in the comparison of more than 100 countries: Germany.

. (TagsToTranslate) Economy (t) economic growth (t) recession (t) economic growth (t) Economic policy (t) Labor market

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