Germany’s GDP could stagnate or even decline in the third quarter, Bundesbank has warned

The German economy has been shrinking over the past two years and will remain stagnant for the rest of the year as it continues to grapple with economic malaise, Bloomberg reported on Friday.

According to a survey conducted by the outlet, the EU’s top economy has been stalling in the three months through September, marking a deeper-than-expected decline.

Economists have already started downgrading their forecasts for this year, with some now seeing protracted stagnation or even another downturn.

“While we expect the market to see a mild recovery at the end of 2024 and in 2025, much of it will be cyclical, with downside risks remaining acute,” Martin Belchev, an analyst at FrontierView told Bloomberg.

He warned that the faltering automotive sector will further exacerbate downward pressures on growth as the top four German carmakers have seen double-digit declines.
Thousands of EU automotive jobs at risk – Bloomberg

The country’s central bank said on Thursday in its monthly report that the German economy may already be in recession. According to the Bundesbank, gross domestic product (GDP) “could stagnate or decline slightly again” in the third quarter, after a 0.1% contraction in the second quarter.

Economic sentiment in the country has suffered due to weak industrial activity, Budensbank President Joachim Nagel said on Wednesday.

“Stagnation might be more or less on the cards for full-year 2024 as well if the latest forecasts by economic research institutes are anything to go by,” he said.

German industry is struggling amid weak demand in key export markets, shortages of qualified workers, tighter monetary policy, the protracted fallout from the energy crisis, and growing competition from China, Bloomberg noted.

The Eurozone’s largest economy has been falling behind its peers over the past years, largely due to a prolonged manufacturing downturn. Germany was the only Group of Seven economy to contract in 2023.

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A third of the region’s major car plants are currently operating at half capacity or less, according to a report

European auto makers are facing more plant closures as they struggle to keep up with the electric vehicle (EV) transition amid slowing demand and growing competition, Bloomberg reported on Wednesday.

According to the outlet’s analysis of data from Just Auto, nearly a third of the major passenger-car plants from the five largest manufacturers – BMW, Mercedes-Benz, Stellantis, Renault and VW – were underutilized last year. The auto giants were producing fewer than half the vehicles they have the capacity to make, the figures showed.

Annual sales in Europe are reportedly around 3 million cars below pre-pandemic levels, leaving factories unfilled and putting thousands of jobs at risk.

The report pointed out that sites shutting down would add to concerns that the region is facing a protracted downturn after falling behind key competitors, the US and China.

“More carmakers are fighting for pieces of a smaller pie,” Matthias Schmidt, an independent auto analyst based near Hamburg, told Bloomberg. “Some production plants definitely will have to go,” he warned.

VW announced last week it was considering closing factories in Germany for the first time in its near nine-decade history. The automaker said it was struggling with the transition away from fossil fuels.

BMW has warned that tepid demand in China poses a further threat to sales and profits.

Volkswagen planning major cutbacks in Germany

The threat of factory closures in Europe has worsened in recent years amid skyrocketing energy prices and worker shortages that have driven up labor costs.

“Failure to turn things around would deal a blow to the region’s economy,” Bloomberg wrote, pointing out that the auto industry accounts for over 7% of the EU’s GDP and more than 13 million jobs.

Car-assembly plants often are “anchors of a community,” securing work at countless nearby businesses, from suppliers of engine parts and trucking companies to the local bakery delivering to the staff cafeteria, the report said.

Closing plants is usually “the last resort” in a region where unions and politicians have a strong hold over corporate decision-making, concluded Bloomberg.

There’s “massive consolidation pressure” for auto plants in Europe, Fabian Brandt, an industry expert for consultancy Oliver Wyman, said. “Inefficient factories will be evaluated, and there will be other kinds of plants that shut down,” he claimed.

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The West African country has built a giant oil refinery to cover domestic demand

Nigeria will commission its new Dangote Petroleum Refinery on Monday in hope of alleviating the chronic fuel shortages that have turned Africa’s biggest oil producer into a fuel importer.

The processing plant, which has capacity of 650,000 barrels per day, is expected to cover all of the country’s fuel demand, according to Nigerian media.

Built by Dangote Group, a conglomerate owned by billionaire industrialist and Africa’s richest man Aliko Dangote, at the Lekki free trade zone near the city of Lagos, the refinery is being touted as a way to end the country’s reliance on imports for nearly all of its refined petroleum products.

The giant complex is one of Nigeria’s single largest investments. It comprises a 435-megawatt power station, a deep seaport and a fertilizer unit. Initially, $12 billion was earmarked to build the refinery, but the project ended up costing $19 billion after years of delay.

Crude processing is scheduled to begin in June, although the research consultancy firm Energy Aspects said that commissioning was an intricate process and that the facility may only start operating later this year. It is expected to reach about 50-70% of processing capacity next year and full capacity by 2025.

The refinery will produce Euro-V quality gasoline and diesel, as well as jet fuel and polypropylene, the company said, adding that the facility was “designed to process a large variety of crudes including many of the African crudes, some of the Middle Eastern crudes and the US Light Tight Oil.”

Despite being Africa’s biggest oil producer, Nigeria imports petrol, diesel, and processed petroleum products because many of its own refineries have dilapidated over the years.

Russia accounts for lion’s share of India’s oil imports – Reuters

Dangote expects the new plant to cover Nigeria’s domestic fuel needs and produce extra volumes for export. It is also expected to boost the market for Nigerian crude to $21 billion per year, the company added.

The Nigerian National Petroleum Corporation has a contract with Dangote to supply some 300,000 barrels of crude per day. However, theft, pipeline vandalism, and underinvestment poses a threat to achieving full output, economist Kelvin Emmanuel told Reuters.

In April, Nigerian oil production slumped under 1 million bpd, below Angola’s output, data showed.

According to Emmanuel, Dangote might be importing oil from international trading companies such as Trifigura and Vitol, as the refinery has not yet signed agreements with oil majors in Nigeria.

Meanwhile, Energy Aspects expects the Dangote refinery to not only solve Nigeria’s fuel shortages but also to reshape the gasoline market in the Atlantic basin.

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