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IW Business Cycle Traffic Light Press Release No. 74 14. December 2015

Hardly any positive signs

The economic outlook for Germany, the Eurozone and China looks rather grim according to the IW Business Cycle Traffic Light. Almost all of the important economic indicators have stagnated or experienced a setback in the fourth quarter of 2015. While things look a little better in the US, consumer confidence has decreased dramatically in all four regions.

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Three reds, five yellows and only two green lights – that’s what the German economy looks like according to the IW Business Cycle Traffic Light. The rating system compares ten economic indicators, a green light denoting a positive development. In Germany, only consumption and PMI (Purchasing Managers Index) fare better than in previous months. At the same time, slow global growth and a struggling world economy have made production and incoming orders perform worse than before.

The state of the Chinese economy looks just as bleak. While data is available for only seven of the ten indicators, three out of these seven have experienced a deterioration: PMI, consumer confidence, and unemployment rate. “China continues to experience an economic slowdown”, says Michael Grömling, head of the IW Business Cycle research unit.

In a similar manner, only one of the indicators in the Eurozone has improved: consumption. The performance indicators for investment, exports and industrial production have not changed significantly throughout the past three months and are subsequently considered to be “yellow”, while the number of incoming orders has shrunk. The United States compare a little better, as the country’s unemployment rate has improved in the fourth quarter of 2015. Nonetheless, not only have PMI and consumer confidence deteriorated, but the total number of green indicators – when compared to the same quarter last year – has sunk from a seven to a mere three.

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