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Germany narrowly avoids recession but growth still weak
By Michele Maatouk
Date: Thursday 14 Nov 2019
LONDON (ShareCast) - (Sharecast News) - Germany has narrowly avoided a technical recession, according to figure released by Destatis on Thursday, but growth remains weak.
Germany's GDP expanded by 0.1% in the third quarter, beating expectations for a 0.1% decline. Meanwhile, data for the second quarter was revised up 0.1 percentage point to show a 0.2% drop.
Positive contributions came mainly from consumption. Compared with the second quarter, household final consumption expenditure increased, as did government final consumption expenditure. Exports rose, while imports remained roughly at the level of the previous quarter. Also, gross fixed capital formation in construction was up on the previous quarter. Gross fixed capital formation in machinery and equipment, however, was lower quarter-on-quarter.
On a yearly basis, the economy grew by 0.5% in the third quarter, in line with expectations and up from a revised 0.3% growth in the previous quarter.
Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said: "We had a sense that a small upside surprise was coming in today's report given the solid September trade data, and upward revisions to the manufacturing numbers towards the end of Q3. Details are not available in this report, so we have to go by the comments from the statistical office, which suggest that growth in consumers' and government spending were the key drivers of the small headline increase.
"So, no recession, but most definitely a very weak economy. In some sense, this is the 'worst' of both worlds for markets. Today's data confirm that the German economy has now stalled, but the headlines are probably not dire enough to prompt an immediate and aggressive fiscal response from Berlin."
Andrew Kenningham, chief Europe economist at Capital Economics, said: "While today's data release comes a bit of a relief, prospects for the coming quarters remain poor. Indeed, business surveys for October, such as the composite PMI and Ifo business climate index, suggest that the economy may well contract in Q4.
"And with policymakers unlikely to loosen fiscal policy significantly, we think a mild recession is more likely than not in the coming year."