The industrial data out of Germany just keeps getting worse.
This week we’ve already seen terrible factory orders, a slump in industrial production, and Thursday’s export meltdown. All of them had their worst month in five years, throwing a massive cloud over the success story usually associated with the German economy.
But it’s not a surprising development to Steen Jakobsen, chief economist at Saxo Bank. He had some harsh words for Germany in a note in May this year:
It strikes me that the one thing that is being ignored by the market is the coming slowdown in Germany. Of course, the market can rise in times of weaker growth, but my big ‘thing’ is that despite very negative macro changes in the last 12 months, no-one believes Germany is slowing economically.
As far back as February, Jakobsen was predicting a slowdown in world growth and that German growth would go into negative territory in the fourth quarter. That seemed an incredibly tall order, but recent data has made it suddenly realistic.
Jakobsen has not changed his stance, telling Business Insider about his extremely bleak outlook for the currency union: “The end game is that Germany is very likely to be in recession — that will bring the rest of the eurozone into recession. I think that will be in the first quarter of next year.”
He’s dismissive of the popular trope among German businesses that the economy is fundamentally fine but that the Ukraine conflict has temporarily thrown it off course. “Germany would have been on this path anyway — we’re further down this path than we would have otherwise been, but Ukraine is not the fundamental problem.”
He’s also got an interesting theory on what might happen to European monetary policy: “I could see a German president of the European Central Bank introducing QE in the eurozone. There’s a political game here.”
That seems like another long shot, but it’s not the first suggestion that Bundesbank boss Jens Weidmann is jockeying to replace current ECB President Mario Draghi before his term ends.