Germany narrowly avoids recession
OUTLOOK REMAINS CAUTIOUS AMID TRADE, BREXIT ANGST
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Germany’s economy stalled in the final quarter of last year, just skirting recession as fallout from global trade disputes and Brexit put the brakes on a decade of expansion amid signs that exports will stay subdued for the time being.
Gross domestic product in Europe’s biggest economy was unchanged for the quarter, the Federal Statistics Office said yesterday. That was below the 0.1 per cent growth forecast in a Reuters poll and the 0.2 per cent expansion achieved by the Eurozone as a whole.
“Germany got away with a black eye,” DekaBank economist Andreas Scheuerle said.
Many of the country’s traditionally export-focused large companies have been hit hard by a cooling global economy and trade disputes triggered by US President Donald Trump. They also face taking a hit if Britain’s exit from the European Union next month is a disorderly one.
The Economy Ministry indicators suggested that said exports Morale is being depressed by weaker demand for German goods and services in China, the Eurozone and emerging markets.
The government is concerned that technological innovation and the acquisition of German industrial know-how by foreign companies could erode the manufacturing base on which much of its wealth is built. Economy Minister Peter Altmaier said last week the government might take stakes in key domestic companies to prevent foreign takeovers — a shift in policy he said was needed to safeguard German prosperity. would be subdued in the coming months but that a construction boom was likely to continue and private consumption will remain strong.
“Solid domestic drivers and fiscal stimulus are providing some support at the beginning of the year,” the ministry added.
With the German economy having shrunk 0.2 per cent in the third quarter a second consecutive quarter of contraction would have met the definition of a recession.
It escaped that by a hairsbreadth but grew just 1.5 per cent in 2018, its weakest annual rate in five years. Growth is forecast to shrink further to 1 per cent this year, and the country faces a budget shortfall of around €25 billion by 2023.
Yesterday’s data left the euro struggling near a three-month low. Fallout from the trade disputes and Brexit are weighing on business confidence, which fell for the fifth consecutive month in January.
“A hard Brexit doesn’t help anyone,” Achim Wambach, president of the ZEW economic institute, told Reuters. “I think the negotiating parties see it that way too and will come to a solution.”
Forecasts of around 1 per cent growth this year were “realistic”, he added.