Brink of a Global Recession: UK and Germany in Contraction

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The UK economy shrank by 0.2% between April and June. It won't stop there. Germany is also in contraction.

The BBC reports UK Economy Shrinks for the First Time Since 2012.

Sajid Javid , the chancellor, told the BBC that he does not expect the UK to slide into recession but I strongly disagree.

The ONS [Office of National Statistics] said GDP had been "particularly volatile" so far this year because of the changes to activity sparked by the original Brexit date of 29 March.

The statistics body said its latest figures showed that those increased stockpiles had been partly run down in the second quarter and that a number of car manufacturers had brought forward their annual shutdowns to April as part of contingency planning, which also hit growth.

Mr Kent-Smith said: "Manufacturing output fell back after a strong start to the year, with production brought forward ahead of the UK's original departure date from the EU."

He added that "the often-dominant service sector delivered virtually no growth at all".

Mr Javid told the BBC: "I am not expecting a recession at all. And in fact, don't take my word for it. There's not a single leading forecaster out there that is expecting a recession, the independent Bank of England is not expecting a recession. And that's because they know that the fundamentals remain strong."

UK vs Germany, Italy, France Spain

Germany, the Eurozone's largest economy is also in contraction.

Italy, the Eurozone's third largest economy is flirting with contraction.

Brexit Will Take a Toll

It's debatable which economies will suffer more from No Deal, but they all will suffer substantially. I propose the EU will suffer more, as noted in Eight Reasons the EU Will Suffer Far More Than UK in Brexit.

What's not debatable is the idea that Brexit will take a significant short-term toll on both the UK and the Eurozone economies.

Manufacturing Recession Has Arrived

Meanwhile, thanks partially to Trump's trade wars, thanks partially to inept policy by central banks, and thanks partially to simple economic exhaustion, a Global Manufacturing Recession Started.

Brink of a Global Recession

A tipping point has been breached. A global recession awaits. The US will not be immune.

Those who expect a warning period need to think again. For discussion, please see Manufacturing Recessions vs Real Recessions: How Much Lead Time Do You Expect?

Mike "Mish" shedlock

Comments (28)
No. 1-9
avidremainer
avidremainer

When the evidence of your own eyes contradicts official figures then somethings up. I am a cock up theory of history rather than a conspiracy theorist but I really fear that something quite cancerous is is hidden beneath the surface. What could be worse than the crap the great and the good are throwing up already?

ColoradoAccountant
ColoradoAccountant

You can only pull future consumption forward through debt for so long. Longer than I imagined. Lowering interest rates helps for a time, a long time, but it can't last forever, if saving is a virtue, not the vice it currently is. However, I have been wrong for a long time now.

Lost_Anchor
Lost_Anchor

Italy's government (maybe the current one, more likely the next one) has to decide whether to implement a huge EUR23 billion VAT tax increase at Brussels behest, or they must vote to "temporarily postpone" it again. Such a large tax, if implemented, would decimate Italy's economy (not that it is in great shape now, but it would be a lot worse). The "new" Italian government, even if it is a different combination of existing coalition, won't last long if they let the tax increase happen. Salvini's party seems likely to win, and they have been pushing for a new Italian Lira, an obvious prelude to ditching the Euro.

Germany's economy is no longer able to subsidize Brussels, even if German voters were as pliable as Angela Merkel. England will be leaving the EU October 31st. France is being ruled by a brutal dictator who has monsieur l'argent shooting at French citizens -- hardly a stable situation in France.

Mish may be right about an EU recession coming soon. Given that the EU has been unable to pay its bills now, when the EU is not in recession, how strained will things get when Germany has a recession?

Sechel
Sechel

Germany built its economy on exporting machinery to feed China. Brittain is suffering from Brexit. The two are separate. China catches a cold and the world gets the flu is what i see ignoring the u.k. issue

Six000mileyear
Six000mileyear

The greatest tell of a German recession is their stock market (DAX) has not made a new, all-time, high in the last 18 months. Its performance is lagging US and UK markets as well. The financial markets forecast a German recession.