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German Orders Down: Sanctions Could Be to Blame

Image via Flickr by The 621st Contingency Response Wing

According to Market Watch, “The country’s economy ministry said orders fell 3.2 percent in adjusted terms in June from May, compared with a 1.6 percent decline in May from April. Analysts polled by The Wall Street Journal had forecast a rise of 0.8 percent.”The latest numbers represent some of the lowest reported since 2011, leading many to wonder whether the decline is a result of the political strife between Russia and the Ukraine.

In addition to the general decline, foreign orders also fell 4.1 percent. It is unclear what, if any impact, Russia had on the drop.

The Wall Street Journal notes, “Germany has been the anchor of growth for the euro zone in recent years, and with its output accounting for 30 percent of the euro zone’s gross domestic product it will be difficult for the bloc’s uneven recovery to gain much traction. For instance, despite the large rise in German GDP during the first quarter, the euro zone as a whole only managed 0.8 percent growth at an annualized rate, or 0.2 percent from the previous quarter.”

Economists are not optimistic that Germany’s output will rise, either.

There’s speculation that the decline is a consequence of the recent trade sanctions imposed on Russia by the U.S. and Europe. In particular, analysts warned that Eurozone economies with strong ties to the country could experience fallout.

However, some parties remain neutral. Economist Carsten Brzeski told CNBC, “In our view, the direct impact from the sanctions on Germany will be rather limited. It is rather the possible reaction from Russia, which could affect German growth in the second half of this year.”

Vladimir Putin plans to impose his own sanctions, some of which could openly affect Germany. Officials are already exploring possible aerospace restrictions that could cause issues for German flyers, as well as other travelers throughout the Eurozone to Russia.

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