The price for a barrel of Brent crude oil has dropped back to $88.40 a price last seen in November 2010 (no doubt petrol prices will be plunging back to 2010 levels any day now…). Brent crude and the price of US crude have lost a fifth of their value since June. The decline is being blamed on concerns about the health of the global economy and the prospect that the Eurozone economy might be falling back into recession. The same rational is being applied to recent losses on stock markets around the world.
Investor sentiment has not been helped by data from the EU’s largest economy, Germany, which shows that the economy has experienced its worst monthly decline in export activity for five years. German exports fell back by 5.8% in August, over the July figure whilst imports declined by 1.3%. The nett effect was that Germany’s trade surplus declined to €17.5 billion for the month.
The German holiday season had a later start this year than normal and this together with worries over the geopolitical situation in Ukraine, is believed to account for the sharp fall. German exports to other Eurozone states picked up by 2% in August compared to the July figure, but exports outside the block shrank by 4.7%.
The export data comes in the wake of the news that German industrial output slipped by 4%, its worst performance since early 2009 and significantly worse than the 1.5% fall that had been anticipated.
The German economy contracted by 0.2% in the second quarter, so if the economy fails to grow when the Q3 data becomes available it will be in a (technical) recession. German business confidence has been dwindling over the last five months and many expect the German economy to manage anaemic growth, at best, in Q3.