Is Germany sleepwalking towards depression or stagnation?

Economic collapse is ruled out, Germany is too strong for that to happen.  We have to look into the question of either economic depression or stagnation. Let me explain both contingencies and allow the jury out there to ascertain towards which end of the stick, Germany is sleepwalking.

Here is a brief over the conditions commonly understood to prevail during economic depression and economic stagnation:

Economic depression relates to severe, sustained and widespread low in most of the economic activities worse than in a recession creating havoc in household income and expenditure. Both consumer income and investment potential go on a downward spin.

Economic stagnation is in contrast, relates to a period where GDP growth in quantum and percentage is minimum or negative, accompanied by high unemployment, low consumer demand along with moratorium imposed on wages. This results in fall of living standards overall. Manufacturing per se gets the beating.

Here are salient features of the state of economic affairs of Germany as on today:

1. Inflation: Average rate has ratcheted up from 2.5% a year ago to 2.8% today. Breaking down into areas shows services cost +3.5%, Food cost +2.0%, over the previous year. Energy price management of minus 1.8 % though salutary has drained Federal cash holding

2. Interest rate was jacked up little to compensate the strain on the consumers. From 2.5% it was fixed upward to 2.8%

3. Employment: Total number of employed is around 46 million where those in the 21 to 64 age bracket has the large quantum at 81% employees. Still the gross unemployment figure hovers around 3 Million people

4. Despite GDP growth rate as forecast by the IMF for the year 2026 is 0.8% in actual fact this may be much lower say around 0.2 to 0.3%

5. Consumer income is still strong at € 46,000 per annum

6. Overall consumer expenditure ticked upward 1.4% where housing cost is estimated to account for 37%, a big chunk indeed followed by food accounting for 15% and transport steering around 12%

7. A praiseworthy factor is the German willingness for leisure and entertainment which is still strong around 15%, illustrating Germans are jolly good fellows.

My conclusion

Even though I humbly I concur that the Jury is out there on the situation of Germany sleepwalking towards either depression or stagnation, I surmise Germany may be sleepwalking towards a brief period of economic stagnation.

The duration can be shortened to  two or three years provided that the Government and my Aryan brothers in Germany begin navigating strategy amid geoeconomics by installing right policies and procedures to get over this bad spell.

 

Cheers!

 

Muthu Ashraff Rajulu

Strategy Adviser

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Strategy Adviser