German Economy Narrowly Avoids Recession In Q4 - ConsultFX

German Economy Narrowly Avoids Recession In Q4

Germany's economy stagnated in the fourth quarter of 2018, thus skirting a technical recession, as trade failed to support growth amid the global trade tensions and the uncertainty linked to Brexit.

Gross domestic product was unchanged from the third quarter, when the economy shrunk 0.2 percent, preliminary data from the Federal Statistical Office showed on Thursday. Economists were looking for a modest increase of 0.1 percent.

Two consecutive quarters of contraction would have meant the biggest euro area economy entered recession.

The Economy Ministry had earlier said that the economy likely avoided a recession in the final three months of 2018, amid signs of rebound in the automobile sector, where activity was hampered by the implementation of the new WLTP emissions testing regime.

Positive contributions to growth mainly came from domestic demand during the fourth quarter, the statistical office said. Gross fixed capital formation grew strongly, especially in construction and, machinery and equipment.

Household spending grew slightly, while government expenditure rose markedly.

Meanwhile, foreign trade failed to make a positive contribution to growth in the fourth quarter with both exports and imports rising at the same pace sequentially.

Indicators points to a subdued development of exports in the coming months, while the recovery process in the automotive industry could accelerate and the construction boom is likely to continue on the back of a sharp increase in orders, the Economy Ministry said.

The ministry also expects a continued positive development of private consumer spending.

"The black eye just got blacker. Still, the upside from today's data is that it can hardly get worse," ING economist Carsten Brzeski said.

"Economic fundamentals remain solid and from here on, chances of a (gradual) rebound are still much higher than chances of yet another disappointment."

On a year-on-year basis, GDP rose an unadjusted 0.9 percent in the fourth quarter after a 1.1 percent increase in the previous three months. Economists had expected 0.8 percent expansion.

After calendar-adjustments, GDP grew 0.6 percent year-on-year in the fourth quarter following 1.1 percent gain in the previous three months. Economists had forecast 0.8 percent growth.

The full year price-adjusted GDP growth for 2018 was revised down to 1.4 percent from 1.5 percent. Growth was the weakest since 2013, when the economy expanded 0.5 percent.

The calendar-adjusted growth figure was 1.5 percent, unchanged from the preliminary estimate released in January. The growth rate was the weakest in three years after a 1.5 percent expansion in 2015.

Earlier this month, the European Commission slashed the German growth forecast for this year to 1.1 percent from 1.8 percent and the projection for next year was left unchanged at 1.7 percent.

The material has been provided by InstaForex Company -