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German economy now in recession
Germany has entered a recession after government figures showed that the country's economy contracted by 0.5% in the third quarter.
This is the second consecutive quarter that the economy has shrunk after a 0.4% contraction in the second quarter.
The fall in economic output was greater than the 0.2% fall that many analysts had expected.
Last week, official figures showed that German industrial output fell 3.6% in September compared with August.
"A negative effect on gross domestic product came from foreign trade, with a strong increase in imports and weakening exports," the Federal Statistics Office said.
The last time that the German economy was in recession was the first half of 2003.
"This confirms the German economy is in a marked slump," said Klaus Schruefer at SEB. "We will definitely get a further contraction in the fourth quarter, probably of a similar order," he added.
Worse to come
That pessimistic outlook was echoed by Sebastian Wanke at Dekabank: "There won't be an improvement in the fourth quarter. The situation will only get worse."
Such gloomy predictions are based on the glut of recent indicators showing a slowdown in the German economy.
Orders for goods produced by the world's largest exporter fell 8% between August and September, according to the economy ministry in Berlin. Orders from outside Europe fell 11.4%, while domestic orders dropped 4.3%.
"Anecdotal evidence and leading indicators are scary," said Carsten Brzeski at ING Financial Markets.
The European Central Bank also released its quarterly survey of forecasters on Thursday. It showed a cut in the average 2009 growth outlook to just 0.3%, from the 1.3% forecast in the last survey released in August.
"In the view of the governing council, a number of the downside risks to economic activity identified earlier have materialised," said the report.
Market reaction
The Dax index of leading German shares fell 43 points to 4,578 in the opening minutes, but recovered to 4,669 in early morning trading, up 48 points on the day.
The Cac 40 index in Paris rose 25 points to 3,259 in early trading.
The reaction of European markets was encouraging, given the heavy falls in Asian markets overnight. The Nikkei index in Japan closed down 5.3%, while markets in South Korea, Hong Kong and Australia all fell between 3% and 6%.
The falls were triggered by a sharp drop in the Dow Jones index of 4.7%, following the US Treasury's announcement on Wednesday that it would be focusing on taking stakes in banks rather than buying up their toxic debt.
Germany has entered a recession after government figures showed that the country's economy contracted by 0.5% in the third quarter.
This is the second consecutive quarter that the economy has shrunk after a 0.4% contraction in the second quarter.
The fall in economic output was greater than the 0.2% fall that many analysts had expected.
Last week, official figures showed that German industrial output fell 3.6% in September compared with August.
"A negative effect on gross domestic product came from foreign trade, with a strong increase in imports and weakening exports," the Federal Statistics Office said.
The last time that the German economy was in recession was the first half of 2003.
"This confirms the German economy is in a marked slump," said Klaus Schruefer at SEB. "We will definitely get a further contraction in the fourth quarter, probably of a similar order," he added.
Worse to come
That pessimistic outlook was echoed by Sebastian Wanke at Dekabank: "There won't be an improvement in the fourth quarter. The situation will only get worse."
Such gloomy predictions are based on the glut of recent indicators showing a slowdown in the German economy.
Orders for goods produced by the world's largest exporter fell 8% between August and September, according to the economy ministry in Berlin. Orders from outside Europe fell 11.4%, while domestic orders dropped 4.3%.
"Anecdotal evidence and leading indicators are scary," said Carsten Brzeski at ING Financial Markets.
The European Central Bank also released its quarterly survey of forecasters on Thursday. It showed a cut in the average 2009 growth outlook to just 0.3%, from the 1.3% forecast in the last survey released in August.
"In the view of the governing council, a number of the downside risks to economic activity identified earlier have materialised," said the report.
Market reaction
The Dax index of leading German shares fell 43 points to 4,578 in the opening minutes, but recovered to 4,669 in early morning trading, up 48 points on the day.
The Cac 40 index in Paris rose 25 points to 3,259 in early trading.
The reaction of European markets was encouraging, given the heavy falls in Asian markets overnight. The Nikkei index in Japan closed down 5.3%, while markets in South Korea, Hong Kong and Australia all fell between 3% and 6%.
The falls were triggered by a sharp drop in the Dow Jones index of 4.7%, following the US Treasury's announcement on Wednesday that it would be focusing on taking stakes in banks rather than buying up their toxic debt.