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Germany avoids recession in third quarter

By Michele Maatouk

Date: Friday 22 Nov 2019

LONDON (ShareCast) - (Sharecast News) - The German economy avoided a recession in the third quarter, data released by Destatis confirmed on Friday.
Gross domestic product was up 0.1% on the quarter, in line with the initial estimate and compared to a 0.2% decline in the second quarter.

Household final consumption expenditure increased 0.4% on the second quarter and government final consumption expenditure rose 0.8%. Fixed capital formation in construction was up 1.2% on the previous quarter and fixed capital formation in other products, which includes expenditure on research and development, rose 1%.

On the year, the economy grew 0.5% in the third quarter.

ING economist Carsten Brzeski said consumption and construction saved the economy from a technical recession in the third quarter.

"Looking ahead, even though the German economy has avoided a technical recession, there are few signs of an imminent rebound for the weakened industrial sector. In fact, the economy has fallen into a de facto stagnation, with quarterly GDP growth averaging a meagre 0.1% quarter-on-quarter since the third quarter of last year. Counting on only consumption and construction to offset the industrial downturn and on a possible rebound in global trade to cover the structural changes and disruption facing several key sectors of the entire economy might be a risky gamble.

"Therefore, the debate on additional fiscal stimulus will continue, not in the sense of a short-term recession-fighting package but rather in the sense of a long-term investment package, tackling the structural weaknesses of the economy."