Germany’s economy unexpectedly shrank by 0.1% in the second quarter of the year, according to new data from Destatis. This contraction comes as a surprise, as economists had projected a 0.1% growth for the period. The decline was attributed to a fall in manufacturing and construction investments, with investments in equipment and buildings decreasing notably. This dip in GDP follows a 0.2% growth in the first quarter of the year, putting Germany’s economy on the brink of recession.
The impact of this economic contraction is seen against a backdrop of various challenges faced by the German government, including an ailing train network, rising energy prices, protests by farmers, weaker demand from China, and a rise in support for far-right politicians. The news comes as a blow to the eurozone, as both Spain and France reported better-than-expected growth figures for the quarter.
Inflation in Germany has also risen, with the harmonised inflation rate reaching 2.6% in July. This increase further complicates the economic outlook for the country and raises questions about a potential rate cut by the European Central Bank in September. Moody’s Analytics economist Ross Cioffi has warned that the Eurozone’s growth remains precarious for the rest of the year, with modest growth at best expected.
In the financial landscape, the UK’s Financial Conduct Authority has extended its probe into car finance mis-selling, with thousands of car loan customers raising complaints about overpayments. Meanwhile, JP Morgan remains bullish on UK stocks, citing attractive valuations and improved political clarity. Additionally, Tesla is rolling out a software update for over 1.8 million vehicles in the US to address safety concerns related to bonnet detection issues.
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