Germany flies into ‘perfect storm’ as economy heads towards recession — live updates

Europe’s largest economy contracted in the second quarter – Bloomberg

Germany’s economy is halfway to recession, after shrinking in the three months to June as global tensions put pressure on its export-driven manufacturing sector.

Europe’s largest economy contracted by 0.1pc in the second quarter, following what state statistical office Destatis called “a slight decline in economic performance”.

German economic sentiment had plummeted to its lowest level since the Eurozone crisis in 2011.” data-reactid=”24″>Over the past year, Germany’s economy grew by just 0.4pc, its worst performance in years. A closely-watched survey of investors yesterday found German economic sentiment had plummeted to its lowest level since the Eurozone crisis in 2011.

Speaking before the widely-anticipated fall was published, Chancellor Angela Merkel said Germany’s economy was entering a “difficult phase,” adding: “We will react depending on the situation.”

If the German economy declines again between July and September — the third quarter — it will be seen as having entered a technical recession, which it narrowly avoided last year.

it would delay tariffs on around $150bn of Chinese exports, easing fears of an impending trade war.” data-reactid=”27″>European stock markets opened in the red this morning, with Germany’s DAX down around 0.4pc. The continent’s top indices had rallied yesterday after the US announced it would delay tariffs on around $150bn of Chinese exports, easing fears of an impending trade war.

9:30AM” data-reactid=”28″>9:30AM

Breaking: UK inflation figures released

  • CPI year-on-year: 2.1pc (prior 2.0pc, est: 1.9pc)
  • CPI core year-on-year: 1.8pc (prior: 1.8pc, est: 1.8pc)
  • July CPI: –0.1pc (June: 0pc, est: –0.1pc)
  • RPI year-on-year: 2.8pc (prior: 2.9pc, est: 2.8pc)
  • July RPI: 0pc (June: 0.1pc, est: 0pc)

9:20AM” data-reactid=”36″>9:20AM

Coming up: Rail passengers prepare for ‘annual kick in the teeth’

A Southern Rail train Credit:  Paul Grover for the Telegraph

In about 10 minutes, we’ll get the UK’s latest inflation figures, which comes in two broad flavours: Consumer Price Index (CPI) and Retail Price Index (RPI). A lower-than-expected figure for CPI is likely to have an impact on the pound (currently having a flat day). CMC Markets’ Michael Hewson explains:

In June the headline CPI came in on the Bank of England’s target rate of 2pc, and could well slip back to 1.9pc, which would mean that real wages are rising at 2pc per annum, though with RPI at 2.9pc it sounds better than it is. Core prices are also set to slide as well, down to 1.8pc.

Given all the doom and gloom surrounding Brexit, and concerns about job losses, this is welcome news, though how long it will last remains to be seen.

Consumer groups will be up in arms. Unions will once again hold this up as a banner of how private capital fails. There’ll be a steady stream of figureheads demanding change and saying enough is enough.

In one sense, it’s absolutely bonkers that train price increases are linked to the retail price index (RPI). This higher rate hasn’t been this country’s official measure for more than eight years. Not for the first time, the railways are open to criticism of being gravely behind the times.

Linking fares to the consumer price index (CPI) instead would give passengers some reprieve. Roughly speaking, using it would save a tenner on the price of a £1,000 season ticket. The problem is, such a change upsets a delicate financial equilibrium.

9:07AM” data-reactid=”57″>9:07AM

‘Perfect time’ for Germany to ramp up investment

The German government is facing increased calls to ramp up spending to stimulate economic growth following this morning’s GDP figures. Matthias Weber, an economist at the University of St. Gallen in Switzerland, says:

While the industrial sector is already in recession, the service sector is currently still doing fine but will likely follow soon. Given the current economic situation at the beginning of a recession, now would be the perfect time for Germany to support the economy by investing in its future. Public investments in railways, roads, bridges, childcare centers, public schools, and renewable energy are much needed. Such investments could currently be made at an extremely low (even negative) interest rate and they would boost the slowing aggregate demand.

The second-quarter contraction put further pressure on German bond yields as investors continue to move towards safe-haven assets.

8:58AM” data-reactid=”68″>8:58AM

National Grid boss: Government must probe why railways and hospitals lost power during blackouts

People wait outside King’s Cross during last Friday’s blackout Credit:  Lewis Pennock/PA

National Grid boss John Pettigrew has said the government must look into why power was cut to critical bits of infrastructure including hospitals and railways during the blackout last week.

Financial Times, Mr Pettigrew said National Grid had restored power quickly, and said problems had been caused a a local network level.” data-reactid=”82″>Speaking to the Financial Times, Mr Pettigrew said National Grid had restored power quickly, and said problems had been caused a a local network level.

He told the paper:

The network was back and in normal operation within seven minutes but the disruption was massive, so it’s absolutely critical we look at the prioritisation of demand.

8:45AM” data-reactid=”88″>8:45AM

Round-up: Government urges no-deal preparation, FirstGroup wins West Coast and HS2 franchises

Michael Gove is in charge of preparations for a no-deal Brexit Credit: Heathcliff O’Malley

Two big stories from this morning:

8:25AM” data-reactid=”105″>8:25AM

Merkel: ‘We’re heading into a difficult phase’ — re-cap

Angela Merkel (right) with defence minister and heir apparent Annegret Kramp-Karrenbauer Credit: Markus Schreiber/ AP