Europe’s largest economy Germany marked time in the fourth quarter of 2019 as its exportoriented industry’s woes continued to weigh on growth, official data showed on Friday.
Gross domestic product (GDP) was flat quarter-on-quarter in October-December, federal statistics authority Destatis said, disappointing the agency’s own expectations and those of analysts surveyed by Factset.
The statisticians also revised their third quarter growth figures, saying that GDP had added 0.2 rather than 0.1 per cent.
Over the whole year, the annual growth rate of 0.6 per cent was Germany’s worst since 2013.
The economy ‘remains in a weak phase’, the economy ministry in Berlin said, highlighting ‘very weak’ industrial production and incoming orders for manufacturing firms towards the end of the year.
After a surge in 2017-18, Germany’s export-oriented economy has been sapped since late 2018 by trade conflicts and other sources of uncertainty, including Brexit and slower growth in emerging economies. For some analysts, that meant simply avoiding a second quarter of shrinkage in 2019 after the contraction in April-June was worth celebrating.
‘Overall economic stagnation in the fourth quarter is already a small success’ given that industrial output shrank strongly, said Fritzi Koehler-Geib, chief economist at KfW banking group.
Industry continues to suffer, with production shrinking sharply in December, Destatis data showed. Meanwhile, ‘private and state consumer spending lost significant momentum after a strong third quarter’, the statisticians added.
Supported by unemployment close to historic lows and gradually rising public spending, consumption had been an important buttress to economic activity in Germany compensating for ailing industry.
Looking ahead into 2020, the rebound many observers were hoping for in the first half of the year will likely be pushed back by the effects of the novel coronavirus COVID-19.
‘The German economy’s performance in the first quarter will largely depend on how the coronavirus affects the Chinese economy, and German exports to China,’ Commerzbank economist Joerg Kraemer said.
Goods sold to China account for around three per cent of German GDP, Oddo bank analysts noted.
But there are challenges to Europe’s powerhouse beyond the cyclical slowdown.
‘The manufacturing sector remains caught between cyclical weakness, on the back of the trade conflict and weaker global growth, and structural weakness, on the back of disruption in the automotive sector and too little investment,’ said ING bank economist Carsten Brzeski.
In the coming months, the country has little to look forward to but ‘stagnation, with a risk of a technical recession,’ he added.
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