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German Economy Hits a Rough Patch

More bad news for weary European bureaucrats: The last best hope of the faltering Eurozone, Germany’s mighty manufacturing engine, appears to be hitting a slump. Reuters:

Activity in Germany’s manufacturing and service sectors declined for a sixth straight month in October as order books thinned, indicating Europe’s largest economy had clearly stagnated in the second half of 2012.

A separate poll of 45 economists by the Munich-based Ifo think-tank added to the gloom by revealing that business sentiment in October fell below even the weakest of forecasts.

When Germany’s engine sputters, all of Europe suffers, especially those countries hoping for a bailout. The only good news is that China, which receives around 65 billion euro in German exports yearly, is showing some signs of recovery, which could give Germany a boost as well. The Financial Times reports:

A slew of economic data released over the past two weeks – from a 10 per cent rise in exports to a big jump in money supply – suggests that the economy could stage a moderate recovery in the coming months. China’s gross domestic product grew 7.4 per cent in the third quarter, the government said earlier this month.

Unfortunately for the world economy, Chinese economic statistics are not the most reliable. Furthermore, almost 60 percent of German exports go to a Europe that is decidedly not in the midst of a recovery. And if Germany goes down, the rest of Europe is likely to go with it.

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