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Business

Germany's Economy Could Succumb to Global Uncertainty

The latest numbers aren't all bad, but some are bad enough to have experts fretting that Germany could be slipping toward recession. Could Germany become the victim of a global trend?

Worker polishes Mercedes

The global slow-down means German sales abroad are down

Perhaps the most alarming statistic published on Wednesday, July 9, concerned exports. They fell by a seasonally adjusted 3.2 percent in May, the biggest fall in four years. Economists had expected a mere 0.5 percent drop.

"Yes, we are losing momentum," Rainer Guntermann, senior economist with Dresdner Kleinwort in Frankfurt, told the DPA news agency. "German exports are at risk of coming off the boil."

The problem, experts say, is the economic weakness of countries to which Germany exports its products.

"The best times for exports are over," Commerzbank analyst Matthias Rubisch told the AFP news agency. "In Western Europe in particular, the main destination for German exports, the economy has suffered a serious setback."

Germany's trade surplus also dropped from 18.8 billion to 14.4 billion euros ($29.2 billion to $22.6 billion) from April to May.

Eroding faith

Worker on assembly line

Overall industrial production is also faltering

Factory orders and industrial production also suffered sharp monthly falls, and that ate away at business confidence.

The Munich based economic research organization said that economic confidence had dropped to 101.3 in June -- one index point lower than predicted.

Retail sales are expected to decline one percent this year as inflation, driven by high oil prices, has undermined disposable consumer income.

Meanwhile, bankruptcies in Germany rose 6.2 percent in April.

Silver linings

Unemployment office

But lines at unemployment offices are slightly shorter

But there was some positive news amidst the gloom.

Germany's central bank, the Bundesbank, expects the German economy as a whole to grow by 2.25 percent. That's less than the 2.5 growth enjoyed in 2007, but up from previous predictions of 1.9 percent for 2008.

Unemployment also fell to by 0.1 percent in June to 7.8 percent -- the lowest rate in sixteen years.

However, Siemens announced it was firing about 4 percent of its global employees, some 16,750 in number, while detergent maker Henkel said it would cut 3000 jobs world-wide.

The redundancies came as companies try to restructure in the face of global economic uncertainty.

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