Germany Is in Recession

Everybody knew it was nearing. But on Thursday, Germany's Federal Statistical Office made it official: the country is in a recession. In the third quarter, Germany's gross domestic product fell by 0.5 percent relative to the previous quarter. Most economists explain that a recession as two quarters of negative growth in succession.

The third quarter results were even worse than the minus 0.2 percent that experts had been estimating. According to Thursday's announcement, the German economy dropped by 0.4 percent in the second quarter, a slight correction from the minus 0.5 percent previously reported.

"The shrinkage is stronger than we had expected," Sebastian Wanke, an economist at DekaBank, told Reuters. "Unfortunately, the early indicators show that things won't get much better in the fourth quarter," said Dirk Schumacher, an expert with Goldman Sachs.

For years, Germany's economy has been sustained by strong exports. Now that orders and sales overseas have fell, however, the sector is dragging the entire economy down with it, despite indications that Germans may be spending more money.

Industrial World Is also in Recession

Meanwhile, the Organization for Economic Cooperation and Development also said Thursday that the entire industrialized world is already in a state of recession.

"The OECD area economy appears to have entered recession," the organization said, pointing to data from the United States, Japan and the euro zone, Europe's common currency area.

The group said that gross domestic product across its 30 member states would shrink by 0.3 percent in 2009—forecasting a drop of 0.9 percent in the US, 0.1 percent in Japan and 0.5 percent in the euro zone.

Indeed, a sense of general economic slump has descended over the 15 countries that belong to the euro zone. In the second quarter, the euro zone economy contracted by 0.2 percent. Recent industrial data—showing that industrial output in France had dropped by 0.5 percent in France, by 2.1 percent in Italy and by 3.6 percent in Germany—have most analysts assuming that third quarter numbers, once they are released, will likely confirm that the euro zone has in fact fallen into a recession.