Germany dodges recession with surprise Q3 growth

FRANKFURT: Germany narrowly dodged its first recession in six years, putting a damper on speculation that the government will add fiscal stimulus any time soon.

The surprise expansion doesn’t change the fact that the economy is going through a torrid period that’s turned it from the eurozone’s traditional growth engine into a source of weakness.

A pile up of trade tensions, weaker global demand and turmoil in the automobile sector has led to the worst manufacturing slump in a decade and put question marks over the country’s role as an economic powerhouse.

The 0.1% increase in gross domestic product was led by consumer and government spending. Construction and exports also rose, while investment in machinery and equipment fell.

The contraction in the second quarter – which had sparked months of recession speculation – was revised to 0.2% from 0.1%.

The euro rose after the report and traded little changed at US$1.1001.

“I would put mild positive as a descriptor on the German GDP report,” said Jim Mcdonald, chief investment strategist at Northern Trust Bank. “Germany is the point of the spear when it comes to manufacturing and especially exposure to China, but consumer spending across all of Europe has been holding up better.”

There have been some signs recently that the economy may be through the worst of its downturn.

Business sentiment appears to have stabilised, and investor confidence about the outlook is improving. But it’s far from an allclear, with most key indicators still at multi-year lows and the economy expected to post sub 1% growth in 2019 and 2020.