In Brief

Germany narrowly avoids recession

Eurozone’s largest economy avoids consecutive negative quarter growth, but the future looks uncertain

Germany has narrowly avoided falling into recession after the country registered zero growth during the last three months of 2018, according to official data.

There had been fears Europe’s largest economy would record two consecutive quarters of negative growth – the technical definition of a recession – after it contracted 0.2% between July and September.

Recapping 2018, federal statistics authority Destatis said the German economy had enjoyed a “first half year with plenty of momentum”, adding 0.4% in the first quarter and 0.5 in the second, before “a small trough in the second half of the year” which was prevented from turning negative thanks to construction and business spending.

“Reasons for slower growth last year include a slowdown in the global economy and a weaker car sector, with German consumers less willing to buy new cars amid confusion over new emission standards,” says the BBC. “In addition, low water levels, particularly in the Rhine, affected growth by holding back movement of some goods.”

Despite the gloomy figures, ING Diba bank economist Carsten Brzeski told Deutsche Welle: “Economic fundamentals remain solid and from here on, chances of a gradual rebound are still much higher than chances of yet another disappointment.”

The Financial Times agrees, saying “while an intensification of a trade war between the US and China and the possible imposition of US tariffs on German automobiles remain a concern, most economists are confident that the country’s economy will expand in 2019 — although at a slower pace than in recent years”.

Others are not so certain.

Sky News says that Germany's export-led model “remains particularly exposed in the EU to the continued threat of a hard Brexit, which would see the UK leave the EU, its single market and the customs union”.

“Germany got away with a black eye,” DekaBank economist Andreas Scheuerle said of the fourth-quarter numbers. “But the first quarter is not looking like it is going to be easy, either, as political uncertainties are weighing heavily on corporate confidence”.

A separate estimate by Eurostat, the European Commission’s statistics bureau, showed that the eurozone expanded 0.2% in the last quarter.

Barret Kupelian, senior economist at PwC, told The Guardian “most of the slack from Germany’s and Italy’s poor performance was offset by strong output growth in Spain, the Netherlands and France which grew at a respectable 0.3% quarter-on-quarter despite the gilets jaunes protests”.

“Spain continues to be the poster-child of the peripheral economies, with its economy growing by an average of 0.7% quarter-on-quarter” he added.

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